In February, the Evenlode Global Opportunities fund marginally underperformed its comparator benchmark, the MSCI World Index. The fund remains ahead on both the year-to-date and trailing quarter basis, and importantly retains a lower volatility profile. Global markets continue to be roiled by macroeconomic events, with February seeing continued speculation over trade tariffs and increased uncertainty over the path to peace in Ukraine.

During the month, the Trump administration announced and then postponed the implementation of tariffs on China, Canada and Mexico. These tariffs have gone into effect in the early days of March, with retaliatory tariffs declared in kind. The market response to tariffs has been negative, with economists expecting them to exert upward pressure on US inflation. We do not know or attempt to predict the likely path of these tariffs, as much depends on the unclear intentions of the Trump administration. However, the impact on the Evenlode Global Opportunities portfolio is expected to be limited. Over 70% of the portfolio is invested in companies that predominantly sell services, which are both harder to tariff, and easier to onshore. Those companies that do import products into the US have geographically diversified manufacturing, so the impact of tariffs is limited. Beiersdorf CEO, Vincent Warnery, stated that his company manufactures its North American products in the US (a third) and Mexico (two-thirds), so the current US tariffs would add only 50bps to the group cost base. Management at another portfolio company told us that they are pre-positioning inventory onshore in the US to allow them to ride out any transitory tariffs without using pricing as a first resort.

The past month also saw the (near) completion of the full year earnings reporting season. Approximately 95% of Evenlode Global Opportunities portfolio companies have now reported and their aggregate performance remains reassuringly healthy. Average organic revenue growth has been over 7.5% and operating margins continue to expand gradually. We have been particularly pleased to see the green shoots of recovery in many of the consumer goods names, including Heineken and Nestlé. In both cases, consistent investment in brand strength has aided them in navigating tricky consumer markets. Over time, we expect the excellent fundamental performance of the portfolio to drive steady returns for investors.