Artemis Funds (Lux) – Global Select fund review of the year to 30 April 2023

Main changes to the fund

• We have added to US technology holdings, finding better value for money after last year’s price falls. We bought Amazon, Salesforce, and Adobe.
• We initiated a position in Ansys in the fourth quarter of 2022, as the valuation had come back to an attractive level. Ansys provides leading software for fluid dynamics simulation, budget for which is often tied to a client’s recurring R&D spend rather than capital expenditure.

• We have sold Nestle and Colgate as these have shown their ability to cope with inflation but offer low growth prospects in the longer term.

Explaining the fund’s performance

• The fund returned 10.8% over the period, behind the S&P 500 index’s return of 12.7%¹.
• Sustainable Consumer was the best performing theme, led by Louis Vuitton and Richemont as China reopened.
• Japanese banks contributed to performance strongly towards the end of 2022 as the central bank raised the cap on the 10-year yield. They have fallen back slightly in the first quarter of 2023 on general banking system concerns after the failure of SVB in the US.
• Factory automation companies such as Keyence performed strongly ahead of expected China order rebounds and continued healthy demand from the US and Europe.
• Being underweight large technology stocks, particularly Nvidia and Meta, held back performance.

The wider context

• Inflation started falling in late 2022 as fuel prices declined. This gave a bullish tone to equity markets at the start of 2023 despite interest rate rises and a yield curve suggesting there may be a recession later this year. Higher interest rates led to tech investors withdrawing deposits from Silicon Valley Bank (SVB), so that bank failed. More significantly, Credit Suisse failed, requiring the authorities to orchestrate a merger with UBS. Banks and their regulators taking fright from these failures will tighten lending – which helps to keep inflation down. However, wage inflation seems stubbornly high and likely to remain a challenge for investors this year.

Looking ahead

• There are positive signs: jobs are plentiful, wages are rising, the Ukraine war seems not to be escalating, fuel prices are down. However, central banks continue to struggle with inflation and many companies find it hard to cope with higher rates after years of cheap money. We would not be surprised if the next few months were more challenging for investors and so we continue to concentrate our stock selection on the companies we have seen coping well over the last few years. Our holdings have grown cashflows through a pandemic as well as sharp rises in inflation and interest rates. We expect they will continue to grow even if economies slow and other challenges, both predictable and less predictable, arise.