Moby is a multi-modal bike-as-a-service business that runs B2B and B2C mobility businesses in Ireland and the Netherlands, with leased assets for restaurants and delivery riders, as well as operating city contracts for consumers. We acquired a stake in Moby through their acquisition of our portfolio company Cargoroo in 2025.

We see beyond the numbers by investing in the value of real relationships.

At Fairtree, we see beyond the numbers. We understand that behind every retirement fund is a promise to real people – to protect and grow their hard-earned savings for a secure future. By building trusted partnerships, we navigate complex markets together, delivering consistent, long-term results that honour that promise.

Market dynamics

Global risk

After the very slow start for US equities during the first quarter, and the superior performance emanating from the EU and the UK, the second quarter witnessed a turnaround in fortunes with the tech-heavy NASDAQ delivering its fourth-best quarterly performance number over the past 18 years. It delivered an eye-watering 17.97% as global investors came to the realisation that the impending collapse of the US economy due to the so-called “Tariff Wars” was not coming to fruition. The broadly based S&P 500 delivered 10.94%, whilst the Large Cap Dow Jones Industrial Average showed investors a still healthy 5.46% during the period. Moving across the pond, it was a much more sombre time for the FTSE 100, which rewarded risk takers with a sound 3.15% as the global bounce in risk was somewhat offset by market-unfriendly noises emanating from the current UK government. European equities sputtered, with French equities delivering sub 1% – a rather uninspiring number.   

Table 1: Major Index Q2 2025 Total Return and historic rankings Q2 2007 – Q2 2025

Source: Bloomberg, 30 June 2025

Moving to European credit, the iTraxx suite of indices produced another set of numbers that were quite meaningful. The iTraxx Crossover 5-year Total Return Index produced a rather splendid 3.58% which outperformed European equities on an outright basis. Our more favoured 2 times levered index, a more realistic measure of the relative performance of European credit, produced a healthy 6.53% for the quarter. We have consistently stated that in the absence of meaningful defaults, the iTraxx Crossover suite remains a good compromise of risk and available returns, and we feel that the index on a levered basis should offer a better risk-adjusted opportunity to investors who are willing to accept an excess premium to insure company credit. This aversion to catastrophic loss is probably the main driver of the very excess returns that the indices have produced since inception. One could suggest that the return to normality might undo this excess return, but our view is that the average investor has little to no appetite for taking such a risk. This play ensures that the risk premium remains elevated and is the very reason for the persistence of this excess return through time.

Given the fact that we have over 18 years of quarterly data, we can do more than just look at the outright performance numbers as well as the relative rankings. We can also have a look at relative risk measures such as standard deviations, Sharpe Ratios and other measures of risk-adjusted returns. This should be important to investors who do “feel” risk in the diffusion of the performance that they have been delivered. For the same absolute return in a portfolio, only a fool would be happy with more risk for that return than less risk. There are many definitions of what risk is, and what is important for one investor is quite different from another, but we feel that the most consistent and comparable is the time-tested standard deviation, which has its roots in its underlying mathematical construct. This makes it consistent in its treatment of any distribution of potential outcomes. The simple calculation of mean divided by standard deviation gives a good measure of risk-adjusted return and is one that we tend to like to look at. This is not the Sharpe Ratio (SR), as the SR strips out risk-free return as well as the volatility of that risk-free return, but we feel that the basic return per unit risk ratio is a good proxy for the slightly more rigorous SR. Obviously, a higher number is better as the investor receives more return for their accumulated risk. We must be aware, however, that a high number on its own cannot be viewed as the “Holy Grail’ since any low volatility index might deliver high levels of Return Coefficient but might not deliver that much by way of return. By way of an example, it might be foolish to buy an index that produces a 0.4% annual return with 0.2% annualised volatility – a return coefficient of 2, rather than an index that produces a 12% return with a standard deviation of 8%.

Table 2 shows the annualised returns, the annualised risk, as well as the return coefficients for the major indices that we monitor. These numbers are generated from our historic dataset and therefore do include risk periods such as the global financial crisis (GFC), the Greek government default crisis, the COVID-19 global pandemic, the more recent Ukraine/Russian war as well as the current war in the Middle East and all the political turmoil in Europe the UK and the United states. Perhaps it is more of the same rather than the exception at the moment, with the world (as usual) teetering on the brink of the potential for some financial fallout, but the traditionalist would suggest that this potential for fallout is the very reason that risk premia exist in the first place. No risk should have risk-free returns; those who choose to take the risk of loss should surely be rewarded for doing so. This line of argument would go a long way in explaining persistence in market returns. The “overvaluation” of US equities has been bandied around for the last two decades, and yet they continue to outperform their European counterparts. Contrary to popular opinion, the outperformance will more than likely continue until participants accept it as the “new normal”, and when that eventually happens, it will probably be followed by a reversal of fortunes. The relative outperformance of Europe over the first quarter of 2025 was indeed reversed during the second quarter of 2025.   From a European perspective, Table 2 highlights the outperformance of credit from a risk-adjusted perspective. In fact, the more risk normalised two times levered index solidly outperforms its equity equivalent, offering investors excess return for a given risk target. If an investor is comfortable with equity-type risk, he/she should be more than happy with the extra return that iTraxx*2 has offered. This index goes a long way to close the relative gap to US equities.

Table 2: Index risk-adjusted return coefficient

Source: Bloomberg, 30 June 2025

As an extension of the last quarter’s report, Figure 1 below shows the cumulative return of the various indices in the currency of the particular index domicile. The various performance traces have been indexed to 100 at the beginning of the second quarter of 2007, when we had the complete historical data for the iTraxx XOver and Main total returns. 

When looking at Figure 1, it also becomes apparent that there are no returns to risk-free. The worst-performing traces over the 18 years are the iTraxx Main Index (125 equally weighted global investment grade credit names) and the US Treasuries total return index. Looking at the delivered risk, it becomes apparent that US Treasuries are not the least risky asset class but rather the well-diversified investment grade CDS index – iTraxx Main. They have generated the lowest returns coupled with the lowest associated risk over the past 18.25 years.

Figure 1: Major Index Total Return Q2 2007 – Q2 2025

Source: Bloomberg, 31 March 2025

As an extension of last quarter’s report, Figure 1 below shows the cumulative return of the various indices in the currency of the particular index domicile. The different performance traces were indexed to 100 at the beginning of the second quarter of 2007, when we had the complete historical data for the iTraxx XOver and the main total returns. 

Figure 1 also shows that there are no returns to risk-free. The worst-performing traces over the past 18 years are the iTraxx Main Index (125 equally weighted global investment-grade credit names) and the US Treasuries total return index. Looking at the delivered risk, it becomes apparent that US Treasuries are not the least risky asset class but rather the well-diversified investment-grade CDS index—iTraxx Main. They have generated the lowest returns coupled with the lowest associated risk over the past 18 years.

Figure 1: Major Index Total Return Q2 2007 – Q1 2025

Source: Bloomberg, 30 June 2025

It is difficult to look at the returns and the associated volatility of those returns simultaneously in Figure 2. To disentangle the graphic and the more meaningful comparatives, we produce the delivered risk (as computed by the annualised standard deviation of quarterly returns) as well as the delivered annualised return over the 18 years. This is shown in Figure 2.  If we were to fit a straight line to this dataset, we would observe an upward slope, indicating that there is a positive return to risk. Increase that risk, and it should result in a higher delivered return. The corollary of this is also apparent: a reduction in risk taken will result in a reduced overall delivered return. The textbooks, which have always stated that there needs to be an excess return to risk, are indeed correct. The short run is deemed to be random, whilst the longer run will yield excess return due to the extraction of the various risk premia. As time elapses, the risk premium (or positive slope) becomes more apparent. One heuristic would be that the short run is randomly distributed around a mean and variance, whereas the longer run is an equally weighted “portfolio” of those independent periods. Thanks to the only free lunch in finance, i.e., the Central Limit Theorem, the long-run results in a normally distributed outcome centred on the delivered risk premium. Mathematics delivers to investors that which economists can only posit. 

Figure 2: Major Index Risk Return scatterplot Q2 2007 – Q2 2025

Source: Bloomberg, 30 June 2025

The domination in return terms of US equities, which was touched on earlier in this piece, is quite apparent in the figure, but one must be cognizant of the fact that these indices are shown in local currency.

Moving to the economic backdrop, Figure 3 shows inflation in the developed world (US, UK and Eurozone), highlighting the fact that inflation is well off its highs hit in the 4th quarter of 2022. The fact that the disinflationary trend, which started in the US, seems to have slowed down and even tacitly reversed a tad, has resulted in a more cautious response from the Federal Reserve. Although the Eurozone has hit its inflation target of 2%, resulting in interest rate relief from the European Central Bank, the question remains as to the stability of inflation going forward around that target. We would contend that inflation itself is a global rather than localised phenomenon, with the major driver of inflation being the overall pressure in global input prices rather than localised output prices. We therefore need to witness US inflation reducing further in order to see a continuation of the more recent gains in the reduction of European inflation. This does leave the ECB with fewer degrees of freedom going forward.

Figure 3: Annual change in Consumer Price Indices March 2010 – June 2025, US, UK and the Eurozone

Source: Bloomberg, 30 June 2025

Figure 4 below shows the level of short rates as administered by the US Federal Reserve, the European Central Bank and the Bank of England. What is of interest to note is the high levels of correlation in both the direction as well as the extent of policy movement. The other point to highlight is that the response from the ECB has been the most aggressive in terms of timing and extent. The ECB was the first to start cutting and has cut the most since the beginning of the cycle at the end of May 2024. So far, the ECB has cut by some 235 bps, whilst the Fed has only cut by 100 bps, which is the same as the BOE. As was previously stated, the excessive end of Q1 pricing of US Federal Reserve action has been largely factored out of the market with Fed Funds Futures only pricing in some 50 bps of cuts by year-end, which has much more realistic optics than the 100-125 bps that were priced in at the end of April. Arguably, a lot has happened since then, but with US headline inflation stabilising in the high 2% context, it is difficult to justify aggressive action from the Fed so long as inflation is markedly higher than the unofficial target of 2%.  Again, this highlights very little in the way of wiggle room for the ECB to continue its cutting cycle.

Figure 4: Central Bank Administered Rates

Source: Bloomberg, 31 March 2025

The movements in global bond yields are shown in Figure 5. The 10-year US Treasury, the UK Gilt and the 10-year benchmark European Bund are shown in the Figure, albeit using 32 different scales. It is interesting to point out the high levels of correlation between these three traces, and although short-term disconnects tend to take place, they generally are swiftly reversed. Bearing this in mind, one can see that the current yield on the generic 10-year bund is about correct. The other very interesting point to make is that the whole “Trashing of the UK GILT market” due to the appointment of Liz Truss on 6 September 2022, which finished some 49 days later, actually is unobservable in the figure. In other words, the mainstream media ascribed the Gilt selloff to the appointment of Truss rather than the Gilt selloff being triggered by a short-term global bond sell-off. Unless, of course, one believes that the US Treasuries and European Bunds were also affected by Truss’s cutting of government spending. To market participants, at least, this was not the case, and the cause/effect connection was inappropriately ascribed. 

Figure 5: 10-year benchmark yields in the US, UK, and Eurozone

Source: Bloomberg, 30 June 2025

 Fund performance

The strategy of the fund is to provide investors access to a well-diversified credit portfolio that aims to outperform its targeted benchmark, iTraxx Crossover Total Return Index, on an after-fees basis over the longer run.  We have no control over the performance of the benchmark and assume that all investors are aware of the risk/reward prognosis of that index. 

Table 3 shows the total performance of the Fairtree Global Flexible Income Plus Fund (Class A) relative to iTraxx XOver, iTraxx Main and the Barclays 3-month Euribor Index over various historic periods. It should be noted that the returns are net of full fees, and the full fees of Class A are 0.97% per annum. It is interesting to note that, although the short-term performance numbers are not that impressive relative to the benchmark, the longer-dated numbers still show marginal excess performance, even though the total fees are 0.97% per annum.  

Table 3: Fairtree Global Flexible Income Plus Fund (Class A) historic annualised total returns to end Q2 2025

Source: Bloomberg, 30 June 2025

A few things become quite apparent, and even a touch startling, when analysing the table.

1. The fund had a rather pleasing second quarter of 2025, generating 2.62% on an outright basis whilst outperforming cash by 2.09% on an after-all-fees basis.
2. The fund has delivered in excess of 0.01% per annum above iTraxx XOver during the past five years and has delivered more than 4.9% excess return to cash over that period.
3. The fund, despite its defensive positioning, has outperformed cash by around 4.50% on the most recent rolling one-year basis.
4. The fund underperformed its benchmark by 0.96% during the second quarter due to running a low-risk bias.

Looking to the third quarter of 2025, the weakness that was witnessed in the previous quarter was seized upon and delivered excess performance during the second quarter. Credit spreads have narrowed again, however, delivering some healthy spread duration returns to the fund. This opportunity has closed, as the iTraxx 5-year Crossover spreads ended the quarter at 282 bps, or some 47 bps lower than where they ended the first quarter of the year. Currently, the fund spread sits at 365 bps, which is a little higher than where they were at the beginning of the quarter. After the two 25 bps rate cuts in April and June, EURIBOR has reduced to 1.94%, which indicates a total yield of around 5.60% on an NACQ basis. Subtracting the A Class TER of 0.97% from the yield gives us a pro-forma total return expectation of 1.15% for the third quarter. This obviously neglects capital gains or losses due to spread compression or expansion, as well as any movements in administered rates at the July and September meetings. We have pencilled in one more interest rate cut by the ECB relief at one of those meetings and feel that the risk case is for the ECB to have completed the cutting cycle. This outlook is dependent on the European inflation trajectory and its convergence to the official target of 2% as well as some more market-friendly international relations with the US.

In spite of this, we do believe that the global economic backdrop has improved somewhat, with global risk markets looking healthy at the time of writing. The quarter has got off to a good start with equities continuing the rally which started at the beginning of Q2.

Looking at the portfolio positioning, the fund has upped risk during the last quarter, and the fund is structured for a continuation of the credit bull run that started quite some time ago. We don’t see evidence of any impending risk-off sentiment, although we expect normal levels of volatility going forward. The fund remains fully defensively invested with ample liquidity to take advantage of any opportunities arising out of any market retracements that might present themselves during the next quarter.

The benchmark has rallied on a year-to-date basis, and although we feel that there is still further room for a continuation thereof, we do feel that at this stage of the cycle, a more defensive positioning is warranted. Our models do indicate that the fund is currently outyielding the benchmark on a pre-fees basis, but the excessive TER of the A-Class does make it quite hard for the managers to outperform the index on a post-fees basis. This probably needs some attention in the short run as the manager is quite loath to provide an investment vehicle that is not aligned to producing excess returns on an after-all-fees basis. The manager is not going to be sucked into excessive risk-taking to offset fee accretion at this point in the cycle.      

Tariffs, Geopolitics, Wait and See

The fund returned 6.73% over Q2-2025 and 9.95% year to date. The fund outperformed its peer group over the quarter and remained within the top decile year to date.

Over 3 and 5 years, the fund continues to be ranked within the top 10% of its peer group. The fund aims to provide investors with significant positive real returns and has outperformed inflation by 5% or more over the last 12 months, 3 years, 5 years and since inception.

We anticipate continued macroeconomic uncertainty throughout 2025. Global investors remain cautious amid evolving geopolitical tensions and shifting trade policies. In the US, ongoing tariff measures and mixed policy signals have weighed on sentiment, prompting a more defensive approach. In Europe, the mood is tentatively positive, underpinned by fiscal spending and supportive monetary policy. In emerging markets such as China, local policy support, easing potential, a weaker US dollar, lower oil prices and innovation in key sectors are helping to stabilise outlooks, although global risks continue to act as a drag.

South African sentiment is more cautiously optimistic. While the stronger rand and safe haven inflows point to resilience supported by commodity demand, a new inflation target, lower yields and improved terms of trade. However, political uncertainty is dampening confidence. The SARB’s decision to cut the repo rate (25bps) reflects economic support. Market sentiment remains cautiously optimistic, though structural and political headwinds persist. Risks to growth have tilted to the downside.

Our portfolio is diversified, highly liquid, and built to navigate a range of macro scenarios. We maintain a defensive allocation in developed markets and a more opportunistic view in emerging markets. We are overweight in government bonds globally and locally, while holding an underweight in equities, particularly in the US. We continue to favour domestic assets. The portfolio is structured to withstand slowing growth, geopolitical uncertainty, and persistent inflation pressures. We are neutral on cash, pending clearer signs of a broader global slowdown. While overall positioned defensively, we hold targeted positions that stand to benefit from improving conditions in China and South Africa.

In this environment, active management and adaptability remain essential. Our strategy is anchored in robust top-down macro insights, supported by disciplined bottom-up research.

 Macro overview

The second quarter was marked by volatility, with markets shaken by renewed trade war concerns and direct conflict between Iran and Israel. Yet, despite the turbulence, financial markets held up well, risk assets generally moved higher, and several US Big Tech shares recovered from earlier lows. Emerging market equities and bonds also performed strongly.

The US economic data continued to slow in Q2 after GDP contracted by 0.5% in Q1 due to higher imports amid tariff concerns and weaker consumer spending. While employment remained resilient, consumer sentiment and household consumption softened. Inflation moderated, prompting several global rate cuts, while the Fed held steady as inflation remained sticky around 3% and the outlook uncertain. The Fed signalled a readiness for future rate cuts, highlighting downside risks to growth. Equity markets rallied strongly, hitting record highs by quarter-end, led by big tech and AI-related stocks, particularly the “Magnificent Seven,” which delivered double-digit returns. The Nasdaq outperformed, driven by names like Nvidia, while the S&P 500 and Dow also posted solid gains. Market performance was underpinned by strong Q1 earnings and renewed interest in growth stocks, as well as a shift to risk-on sentiment supported by easing inflation, improving trade talks, and expectations of policy support.

The US Treasury market saw a steepening yield curve in Q2, with long-term yields rising on fiscal concerns and short-term yields falling as softer data made the Fed more dovish. Fiscal concerns rose in May over rising debt, weak bond auctions, tax cuts, and after Moody’s downgraded the US credit rating. Yields fell again in June as some Fed members signalled support for rate cuts if inflation stayed low, though Chair Powell stuck to a cautious stance.

European sovereign bond yields fell in Q2, especially on shorter-dated bonds, driven by weaker growth expectations following US tariff threats and easing inflation. The ECB cut rates twice, bringing the main rate to 2.00%, while signalling the easing cycle may be nearing its end. Equities in the region gained, supported by the delay in US tariffs on EU imports, the ECB’s rate cuts, and a stronger euro. Germany showed signs of recovery, with the Ifo business climate index hitting a one-year high. Industrials and real estate led equity gains, while consumer discretionary, energy, and healthcare lagged.

Emerging market equities delivered strong returns in Q2. The performance was supported by improving trade sentiment, a weaker US dollar, lower oil prices and structural improvements in key regions. China rebounded from April lows as the US reached a trade truce with China. AI optimism and state support for the property sector also increased, though weak domestic data capped gains.

UK equities posted solid gains in Q2, with the FTSE 100 reaching a record high in June as markets stabilised following early-April tariff tensions and the UK struck a trade deal with the US. The Bank of England cut rates by 25bps to 4.25% in May, which, along with Governor Bailey’s call for closer EU ties, further boosted sentiment.

Commodities were the standout performers in Q2 2025. Gold briefly hit a record US$3,500/oz before ending the quarter up 6% at US$3,303, supported by geopolitical risk, central bank buying, and a weaker US dollar. The broader commodity complex performed well, and industrial metals like copper also gained before Trump announced a 50% tariff on copper imports. Oil fell 10% to US$67/barrel, with prices dragged down by oversupply concerns despite a temporary spike during the Middle East conflict.

South African equities ended Q2 in positive territory, led by a strong rebound in the resources sector, particularly platinum group metals and gold miners. Improved political stability and investor confidence supported a 1.62% appreciation in the rand to R17.71/USD. Bond yields declined across the curve, supported by a 25bps rate cut from the SARB and comments suggesting a new 3% inflation target could be announced soon. This shift in tone, alongside a more favourable inflation outlook, helped anchor expectations. Inflation remained subdued, with headline CPI at 2.8% and core inflation at 3.0%. While economic growth remains weak, with Q1 GDP rising just 0.1% q/q and 0.8% y/y, slow structural reforms and improved macro stability are bolstering medium-term prospects.

Government of National Unity (GNU) dominating headlines in Q2. After early disagreements over the National Budget, the GNU managed to pass a revised fiscal framework, seen as a positive signal by markets. Sentiment was further supported by President Ramaphosa’s trip to the US alongside DA leader John Steenhuisen, where they presented a united front in talks with President Trump. However, cracks in the coalition reappeared in June when Ramaphosa dismissed a senior DA cabinet member, prompting the DA to boycott the upcoming National Dialogue.

Market review

Global equity markets rebounded from Q1. Global equities rose 7.7%%, while ex-US equities outperformed with 12%. US equities rose 11% mostly led by the strong performance of the large consumer technology stocks. The equally weighted S&P500 was up 3.4% over the quarter, showing how concentrated the US equity rally is. Europe was up 2.5% and Emerging Markets up 12%. Within Emerging Markets, China 2% and South Africa outperformed 13.6%.

SA Equities (Capped SWIX) was up 9.7% over the quarter. SA industrials was the best performing sector, up 12% (with Naspers/Prosus and MTN performing the best within the index), and SA resources was up 9.8% predominantly driven by gold stocks (Anglogold Ashanti and Anglo America performing well) and PGM stocks (Valterra and BHP performing well). The rand appreciated around 3.5% over the quarter against the US dollar.

During the quarter, the South Africa All Bond index rose 5.9% and cash returned 1.9%. The Bloomberg Barclays Global Aggregate Bond Index gained 0.9% over the quarter.

Commodities were strong in general, with Palladium (11.7%), Gold (5.8%) and Platinum (36.2%) the strongest performers.

The US dollar weakened by 7% against the major currencies as policy uncertainty increased and the growth outlook weakened.

Portfolio performance

The Fund returned -0.3% over Q4 2024 and 13.4% over 2024. The Fund underperformed its peer group over the quarter but outperformed over the year.

The fund returned 6.73% over Q2-2025 and 9.95% year to date. The fund outperformed its peer group over the quarter and remained within the top decile year to date. This outperformance was primarily driven by the positive contribution from asset allocation, offsetting the negative contribution from security selection. Our security selection within SA Equity, Global and Emerging Market Equity detracted from excess returns, while security selection within Commodities and SA Property contributed to excess returns.

Our SA Equity exposure underperformed the FTSE/JSE Capped Shareholder Weighted (Capped SWIX) Index. Our overweight exposure to Gold Miners was the key performance contributor during the quarter, along with our overweight position in Prosus & Naspers. This was more than offset by negative contributions from our overweight positions in General Retail & Diversified Miners and underweight exposure towards PGM Miners and Global Defensive stocks like Richemont & British American Tobacco.

Within Global Equity, overweight exposure to Technology contributed, while overweight exposures to Consumer Discretionary and Financials detracted.

Within Commodities, our overweight in Gold and Platinum contributed to excess returns.  

Within asset allocation, our decisions to be overweight SA Equity and Emerging Market Equity and underweight Global Equity worked in our favour. Our overweight in Commodities also contributed, while being overweight in US Treasuries detracted.

The fund returned 10.9% for the quarter, underperforming the benchmark by 0.6%. The MSCI ACWI Index ended 11.5% higher, with the biggest gainers being the Netherlands and Germany, increasing 18.3% and 16.3% respectively. The MSCI Emerging Markets Index increased by 12% driven by impressive gains in South Korea and Taiwan, increasing 32.8% and 26.1% respectively (all in USD).

US equities ended the quarter 11.2% higher; however, they experienced pronounced volatility following President Donald Trump’s ‘Liberation Day’ announcements of tariffs on imported goods. The new tariffs were later suspended for 90 days across most countries, resulting in the subsequent rebound of shares, with the S&P500 registering an all-time high by quarter-end. The US economy contracted at an annualised rate of 0.5% in the first quarter, primarily due to a surge in imports ahead of anticipated tariffs and a decrease in government spending. The labour market remained strong, while CPI inflation continued to slow over the period. Despite these mixed signals, the Fed maintained its benchmark interest rate at 4.25% – 4.5%, citing increased economic uncertainty and the potential risks posed by new tariffs. European equities rallied 11.4% over the quarter, with robust performances from the Netherlands and Germany, increasing 18.3% and 16.3% respectively. Germany’s equity rally was driven by fiscal stimulus plans, easing US trade tensions and renewed investor interest in undervalued European stocks. The region saw strong corporate earnings, declining inflation pressures and a further 50 basis points cut to rates by the ECB to 2%. Within Emerging Markets, South Korea surged 32.8%, driven by post-election optimism, the government led “Value Up” reforms to boost corporate valuations and a rally in financials, industrials and large-cap exporters and chipmakers like Samsung, SK Hynix, Hyundai and Kia. Taiwan’s market gained 26.1%, driven by booming AI-related semiconductor demand, easing US-China trade tensions, and strong foreign capital inflows.

On a sector level, Health Care and Energy were the worst-performing sectors over the quarter. The energy sector was dragged lower by the oil price declining 9.5% over the period, where the fund’s underweight holding added to relative performance. The overweight holding in health care and the underweight in industrials, however, detracted from relative performance. The Trump administration is seeking to lower drug prices in the US, which has pressured the healthcare sector. The Information Technology sector was the best-performing sector over the period, where the fund’s overweight positioning contributed to relative performance. Stock picking within the consumer discretionary and financials sectors detracted from relative performance, while stock picking within the materials and the consumer staples sectors added to relative performance.

Noteworthy portfolio actions over the quarter included partially switching the funds’ EM technology exposure in Pinduoduo and Prosus into a larger position in JD.com, as well as topping up the existing positions in the DM technology businesses of Google and Applied Materials. The fund holdings in Ross Stores, Sysco, UnitedHealth Group and Vertiv Holdings were sold during the quarter. New positions were initiated in Progressive Corp, Lowe’s, Goldfields and Fiserv, while the positions in BP and Glencore were topped up on weakness.

Notable contributors to fund performance were positions in Microsoft (+153bps absolute, +39bps relative), Nvidia (+93bps absolute, -64bps relative) and Broadcom (+63bps absolute and relative). Notable detractors from performance over the quarter came from JD.com (-68bps absolute and relative), Pinduoduo (-58bps absolute and relative) and Kaspi (-45bps absolute and relative).

The fund is positioned with an underweight in the cyclical and defensive names, in favour of EM technology exposure and a neutral DM technology holding. From a geographical perspective, the fund remains underweight in the US and Canada, while being overweight in China through technology shares and Kazakhstan through financial shares.