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Artemis Global Income Fund

All data as at 31 March 2017 except where specified
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The fund’s aims

The fund aims to achieve a rising income combined with capital growth from a wide range of investments. The fund will mainly invest in global equities but may have exposures to fixed interest securities. We will not be restricted in our choice of investments, regardless of size of the company, the industry it trades in or the geographical split of the portfolio.

Current prices and yield
(class I)

As at noon, 21 April 2017
Bid price (acc units)126.15p
Bid price (dist units)97.24p
Offer price (acc units)127.77p
Offer price (dist units)98.49p
Historic yield (acc units)2.93%
Historic yield (dist units)3.01%

Investment information
(class I)

Minimum lump sum investment£250,000
Ongoing charge (acc units)0.81%
Ongoing charge (dist units)0.81%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 0.75% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund managers’ update

After a busy 18 months of elections, changes in monetary policy and exogenous shocks to the economy, markets paused for breath in March. There were no big directional moves: no major trends took hold and there was no significant change in market leadership. But there was a lot of uncertainty. At times last year, investors seemed to be engaging in a tug of war. On one side were those expecting deflation and falling bond yields and therefore buying defensive growth stocks and bond proxies. On the other side was a smaller group anticipating that stronger economic data (a result of fiscal and monetary stimulus) would lead to rising commodity prices and higher bond yields, and who were therefore buying more economically-sensitive equities and value stocks. Towards the end of last year, the second group gained the upper hand suddenly and decisively. When it came, this move into cyclical assets and stocks that benefit from higher interest rates - and particularly the sharp rally in US banks after Trump’s election - was both swift and powerful: blink and you missed it. Bank of America, for example, has outperformed the wider US benchmark, the S&P 500, by some 50% over the past 12 months. Almost all of that outperformance, however, came in October and November. The story for other US banks has been similar.

In retrospect, it is clear that what defined 2016 was China’s decision to apply economic stimulus.

After the violence of the cyclical rotation in the second half of last year, wider market movements in the first quarter of this year have been more subdued and things have been much less clear A vague consensus has begun to form around the idea that strength in the global economy is real and that there is no (immediate) threat of deflation. That is not to say there is universal bullishness on the economy - far from it. But the extreme bearishness seen in early 2016 has dissipated. That has been most evident in the change in the way investors are positioned in the banking sector: in the middle of last year, large underweight positions were the norm. That is no longer the case. And as is always the case when something becomes the consensus view, forward-thinking investors are obliged to think about whether a change is imminent. Today, we are cognisant that investors have become more optimistic just when a number of economic indicators seem to be peaking. Now is not the time to be adding risk to the portfolio.


The fund outperformed the market in March and is significantly ahead of the index over the year to date, adding to its strong performance since the summer. Some of the biggest contributions in March came from our holdings in three Italian telecoms and TV ‘tower’ companies: INWIT, Rai Way and EI Towers. These are essentially stable infrastructure assets with long-term contracts with telecom providers (such as Vodafone and Telecom Italia) as well as broadcasters such as RAI and Silvio Berlusconi’s Mediaset empire. The towers businesses combine steady growth in earnings and predictable business models that hold up well through the economic cycle, they currently have low levels of debt (perhaps even too low for such stable businesses) and modest valuations: they continue to trade on far lower multiples of their earnings than similar companies in emerging markets and the US. In effect, a discount is being applied to these assets because they are Italian. Their valuation seems to be anticipating Italy’s imminent departure from the eurozone - and while this is not impossible (we are not blind to the level of Italy’s debts or the dysfunctional character of the eurozone), it is not as likely as these companies’ depressed valuations imply. Other Italian assets, such as government bonds, are pricing-in a much lower probability of Italy’s exit. More recently, our towers stocks began to perform well as investors returned to Europe to buy ‘mis-priced’ assets. Equity flows into Europe have been positive over the year to date, with investors using US equities as a source of funds. On top of that, there are signs the Italian broadcast and telecoms tower sector will gain blessing from regulators to consolidate, leading to strong synergies and cost savings. This has prompted a very strong rally in Rai Way and EI Towers. We think these are perfect holdings for an income fund and hence all three stocks feature in the fund’s top-10 holdings.


What comes after this pause for breath? In retrospect, it is clear that what defined 2016 was China’s decision to apply economic stimulus. Its worry was that the global economy stood on the brink of a deflationary ‘hard landing’ as the Fed embarked on what some expected would be aggressive monetary tightening. To avoid this calamity, policymakers in China ‘inflated’ the economy rather robustly. For its part, the Fed didn’t raise rates four times in 2016 (as some had feared) but only once. The resultant surge in aggregate demand sent commodity prices higher and inflation - and growth - rippled through the global economy. Although the actions of policymakers in Beijing are less visible than Trump’s tweets, we would argue that they had a more significant effect. A chart showing growth in China’s money supply closely resembles changes in the price of iron ore, Chinese real estate and the performance of equities. Today, however, the effects of that stimulus are beginning to fade: the economy is still growing but the rate of acceleration is slowing. So, having performed well since last summer, our response has been to take some profits at the margin and trim the balance of risks in the portfolio. It still has a fundamentally pro-cyclical stance and remains positioned in the expectation that rising bond yields will have a more beneficial effect on some sectors than on others - we still believe US bond yields will hit 3% before they hit 1%. At the same time, we acknowledge that the 10-year US Treasury yield has traded in a narrow range for a while. So while we still like our US bank stocks, this is not - yet - the time to add to them.

In the meantime, we look for stocks that can benefit from the improved macroeconomic environment but that are also ‘special situations’ seeing positive stock-specific change. Czech lender Moneta Money Bank is a good example. A number of small European countries, such as Denmark, Sweden and the Czech Republic, whose economies are linked to the eurozone but which aren’t part of the single currency, have been running very loose monetary policy to keep their currency cheap and their economies competitive. Monetary policy is tightening but in a desynchronised fashion - so it is important for global investors to get currencies right. For the last three-and-a-half years, the Czech National Bank has held down the value of the koruna. The result has been booming house prices in Prague and a fall in unemployment. In early April, however, the central bank removed the currency cap. Our holding in Moneta was a direct beneficiary of that [I]de facto[/I] tightening of monetary policy. We were not holding Moneta solely as a way of profiting from helpful macroeconomic trends in the Czech Republic or from shifts in the currency market. The stock fundamentals were also compelling - we were attracted by its solid balance sheet, its cash-generative business, good management and attractive dividend yield. Moneta is an example of what we hope to continue to do: combining our analysis of macro trends in the global economy with good stock-picking on a micro level.

24 March 2017

Global equities: Will the run go on?

The global economy continues to strengthen, and with it corporate profits. However, politics and monetary policy are potential risks. Jacob de Tusch-Lec talks about how he is positioning the Artemis Global Income Fund in this environment.

Value of £1,000 invested at launch to 31 March 2017

Value of £1,000 invested at launch to 31 March 2017

Data from 19 July 2010. Source Lipper Limited,distribution units, bid to bid in sterling to 31 March 2017. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 31 March 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class I)

12 months to 31 March30.5%-3.4%20.0%13.9%30.2%
12 months to 31 March30.5%-3.4%20.0%13.9%30.2%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, distribution units, bid to bid in sterling. All figures show total returns with dividends reinvested.

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Global equities: Will the run go on?

Security Code

Risk warnings

THIS INFORMATION IS FOR PROFESSIONAL ADVISERS ONLY and should not be relied upon by retail investors.
The fund's annual management charge is taken from capital. The fund may invest in emerging markets. The fund may invest in the shares of small and medium sized companies.
Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.
Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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