March was dominated by the war in the Middle East, which started on the first weekend of the month, with a ceasefire announced just after month-end. The sell-off was broad-based across both equity and bond markets. Evenlode Income fell -9.5% compared to a fall of -8.0% and -6.7% for the IA UK All Companies sector and FTSE All-Share respectively. The fund’s lack of exposure to oil stocks was a significant drag on relative performance, with the sector rising approximately +20% during the month.

In terms of fund holdings, the most negative contributors to return were Unilever, Reckitt and Intertek. The oil price spike caused weakness in consumer stocks in March. Unilever also announced the planned combination of its Foods business with McCormick. While the transaction is complex, we see it as a logical step in Unilever’s transformation into a faster-growing, higher-margin household and personal care business. Reckitt released strong full year results and while earnings guidance was slightly below market expectations, higher investment levels and strategic portfolio changes have set the group up for promising earnings and cash-flow compounding. Despite slightly slower growth in the fourth quarter, Intertek delivered double-digit earnings growth last year and expects 2026 to be another strong year.

The most positive contributors to return were Bunzl, Clarkson and Diploma. Bunzl’s full year 2025 results demonstrated improved performance at its US distribution business following operational issues last year. Clarksons reported solid results, and improved momentum at the end of last year has continued, with the Middle East war driving shipping rates higher. Diploma’s focus on structurally attractive industrial niches is driving strong growth, with full year profit expectations upgraded by +13% in March.

In terms of portfolio changes, we reduced Halma which has performed strongly over the past year, leaving its valuation less attractive. We increased exposure to several existing positions, including niche engineering companies Rotork, Spirax, Smiths Group and Weir Group. Share prices fell back but these holdings are well-placed to benefit from structural investment in areas such as power, water, energy security, energy efficiency and electrification.

The fund’s relative performance has clearly been disappointing over recent months. Portfolio holdings, though, are resilient market-leaders with highly attractive micro-economics, and we are confident their qualities will be appreciated again by investors in due course. The aggregate portfolio continues to grow at a decent rate and spin off a huge amount of cash. The free cash flow yield stands at 6.4% for this year, with many holdings currently buying-back a significant quantity of shares at very attractive valuations.