January resumed the global equity market’s strong tone from 2024, but with a different complexion to the strength which benefitted the fund’s performance. Financials continued to be strong in the market, which was a headwind for relative performance, but Information Technology (IT), the other standout market driver from last year, was comparatively weak. The portfolio’s IT holdings fared relatively well though with consultancies Capgemini and Accenture finding favour after the latter posted strong quarterly results toward the end of last year. The Health Care sector was strong, contributing a percentage point of the fund’s return with Medtronic, EssilorLuxottica, Roche and Sanofi all posting double digit gains. Results have been steady from these businesses, and market participants may be recognising some of the valuation opportunity in the sector. Consumer Discretionary firms staged a rebound, notably luxury giant LVMH as gloomy sentiment around the Chinese consumer eased as other firms reported their results. Consumer Staples businesses posted positive returns, but below the market level. Cosmetics company L’Oréal benefitted from the same change in sentiment as LVMH, Reckitt’s stock price increased from what we see as a low level, whilst alcoholic beverage company Diageo fell ahead of its full-year results.

We would not normally expect the portfolio to perform better than the market in a strong month like January. It is broadly explicable by the shift in market performance drivers from IT and more cyclical business models toward more ‘defensive’ sectors and those that appear to be trading more cheaply in the market. This is where our trading had taken the portfolio over recent years based largely on valuation considerations. Despite the balance of the portfolio being toward less economically sensitive business models, we are seeing good revenue, profit and dividend growth coming through. We are getting the latest updates of the full year with reporting season just underway, and we will give a full roundup once most of the results are in.