Artemis SmartGARP Global Equity Fund update

Raheel Altaf, manager of the Artemis SmartGARP Global Equity Fund, reports on the fund over the quarter to 31 December 2024.

Raheel Altaf

Source for all information: Artemis as at 31 December 2024, unless otherwise stated.

  • Fund outperforms index returning 7.0% vs 6.0%.
  • Leaving 2024 performance 21.7% vs 19.6% index and top quartile within peer group.
  • Fund continues to have significant value bias (47% discount to the market)…
  • …with market-level quality and growth.
     
12m forward P/E ROE Dividend yield
Fund 9.7x 14.8% 3.5%
Benchmark 18.2x 14.5% 1.9%
Relative -47x +0.3% +1.6%
Source: Artemis, Bloomberg, MSCI as at 6 January 2025. ROE is a blend of 3-year trailing and 2-year forward.

The final quarter of 2024 proved to be perhaps the most eventful (and most consequential) quarter of the last few years. During October, global bonds suffered their worst monthly performance since September 2022. This was driven by robust economic data in the US, including a strong jobs report and a six-month high in core CPI inflation. There was also increasing speculation about fiscal policy tied to Republican prospects in the 2024 elections. In the UK, additional government borrowing sent gilt spreads to levels exceeding their 2022 peaks under Liz Truss’s premiership.

November kicked off with Donald Trump’s election victory and the Republican sweep of Congress. However, market optimism was tempered by Trump's announcement of tariffs on Mexico, Canada and China. It remains to be seen to what extent rhetoric is translated into policy. 

December saw a renewed market downturn amid a more hawkish stance by the Federal Reserve. Although the Fed cut rates by 100bps over the course of 2024, its cautious guidance for 2025 triggered a sharp selloff, with the S&P 500 experiencing its steepest Fed decision-day drop since 2001. European markets also faced headwinds, as the ECB’s rate cuts failed to meet dovish expectations, driving sovereign bond selloffs and a rise in bund yields.

In emerging markets, China continued to disappoint investors despite a significant amount of stimulus announced over the period. Korea experienced its own woes after President Yoon announced the imposition of martial law, which was then, in a very democratic fashion, voted down by the opposition party.

In aggregate, global markets had a strong quarter, returning 6.0% in sterling terms. From a country perspective, the US led, fuelled by optimism around Trump and a strong dollar. Emerging markets and Europe were weak. From a sector perspective, communication services and technology led, and materials and healthcare lagged.

Fund performance

Over the period, the fund outperformed the index, returning 7.0% (in sterling terms) vs. the MSCI All Country index's 6.0%. Over 2024, the fund was also ahead of the index, returning 21.7% vs. 19.6%. Stock selection drove returns despite both regional and sectoral allocation acting as a negative.

On the positive side, Unum (insurance), General Motors (autos), Imperial Brands (tobacco) and United Labs (healthcare) added value. Our financials exposure proved to be most positive from a sector perspective, with Chinese banks standing out.

On the negative side, our continued lack of exposure to Tesla and Apple proved to be our greatest detractors over the quarter with the stocks up 65% and 15% (in sterling) respectively. Outside of our technology exposure, healthcare in the US had a torrid time with our holdings in HCA and Tenet detracting, the former we have reduced, and the latter has been removed from the portfolio.

Activity

Additions:

Tech – Added to Alphabet, Nvidia and TSMC

Insurance – Munich Re, Primerica, Just Group

Sales:

Healthcare – Sold Tenet and Novo Nordisk. Trimmed HCA and GSK

Tech – Reduced Microsoft

The minor changes over the month leave the fund's high-level characteristics unchanged. We have a significant valuation discount to the market while maintaining attractive growth and income characteristics. At a regional level, little has changed. We remain heavily overweight to emerging markets and Europe, with a substantial underweight to the US (47% of the fund vs. 66% index). At a sector level we are overweight banks, insurance, and food and beverages. Our main underweights are to technology, financial services and industrial goods.

Our focus on the fundamentals continues….

We have been talking about the attractive, differentiated characteristics of the fund for some time now in the hope that clients will recognise the value of holding such a fund as ballast in their portfolios. There have been multiple headwinds to our asset allocation: a 20% underweight to the US, overweight to China, UK, and more broadly an overweight to Europe and EM. We are content with this positioning.

When we look at the benchmark we follow, we are somewhat unnerved. By our assessment of the fundamental attractiveness the US doesn’t warrant the around 66% share that it has in the MSCI World index, and Europe and emerging markets deserve a much larger share. Extremes can persist, but eventually there is almost always mean reversion. Having balance, in our view, is sensible and will reward you over the long term.

This balance we feel is particularly important as we enter a year where there are risks to the rosy outlook that is held by many market participants. Unsustainable government debt levels, high valuations, potential re-inflation and therefore higher rates, and conflicts across the globe are some of the issues that investors face, not to mention an incoming president who is highly unpredictable. Balance through diversification in businesses that are growing their fundamentals and where there is a valuation safety net is not a bad place to be.

Past performance is not a guide to the future. Source: Lipper Limited as at 31 December 2024 for class I accumulation GBP. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. This class may have charges or a hedging approach different from those in the IA sector benchmark. Benchmarks: MSCI AC World NR; A widely-used indicator of the performance of global stockmarkets, in which the fund invests. IA Global NR; A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. These benchmarks act as ‘comparator benchmarks’ against which the fund’s performance can be compared. Management of the fund is not restricted by these benchmarks.
 

Raheel Altaf

Manages:

‘Global emerging markets equity‘, 'Global equity' strategies

Raheel joined Artemis in 2014 and has managed Artemis‘ ‘global emerging markets equity‘ and ‘global equity’ strategies since launch in April 2015 and since April 2022, respectively.

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