Market Round-up
Market performance over the year was defined by narrow leadership, with a small number of mega-cap growth driving the majority of returns. For the global index, investor enthusiasm for companies exposed to the artificial intelligence capex boom remained the dominant theme. As a result, companies with strong balance sheets, recurring revenues and disciplined capital allocation often lagged despite delivering solid operational performance. This created a challenging environment for quality-focused strategies. However, as the year drew to a close, we have seen some questions on the sustainability of the AI capital investment boom begin to emerge.
Looking ahead, we believe the foundations for a shift are emerging. With narrow leadership taken very far over the last three years, and fundamental risks rising, investor focus may broaden. In such an environment, businesses with resilient margins, durable pricing power and strong economic moats should regain favour. We believe out-of-fashion quality could stage a meaningful comeback in 2026 as long-term fundamentals and valuation discipline reassert themselves.
Investment Views
Hugh and Chris M analyse Evenlode Income’s diversified list of market-leading quality businesses, with good growth prospects, low levels of debt and total leverage, finding these to have an above average economic sensitivity. They further explain why such characteristics have recently been of little interest to investors and how it is only a matter of time before they become appreciated by investors again.
Meanwhile on the global front, Ben P and Rob Hannaford discuss the stocks that are being sold at discounted prices and how to assess the underlying quality value of these, focusing on the Evenlode Global Income’s newest position in Zoetis, the world’s largest animal drugs company.
Finally, for our winter book club, members of the Evenlode Investment team have compiled a selection of books that we have read and found interesting over the second half of 2025. Not all of these texts can be described as light-reading, but we hope you will find something engaging on the list!
Important information
Issued by Evenlode Investment Management Limited (Evenlode). Evenlode is authorised and regulated by the Financial Conduct Authority, No. 767844.
Whilst the funds Evenlode acts as investment manager for are available to retail investors via third party providers, please note that Evenlode do not have permissions from the FCA to deal directly with retail clients and the information provided in this newsletter and on the Evenlode website is for information purposes only. If you are not an investment professional you may still wish to visit the Evenlode website to find out information about Evenlode and the funds we manage but we recommend that if you wish to obtain advice regarding the suitability of the IFSL Evenlode Investment funds for you, you should contact a financial adviser. Applications to invest in any fund referred to on the Evenlode website can only be made through a third party and must only be made on the basis of the offering documents relating to the specific investment.
This newsletter is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. The sale of shares of the fund may be restricted in certain jurisdictions. In particular shares may not be offered or sold, directly or indirectly in the United States or to U.S. Persons, as is more fully described in the Funds Prospectus.
Please note, any views represent the opinions of the Evenlode Team as at the time of writing and do not constitute investment advice. Where opinions are expressed they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This newsletter is not intended as a recommendation to invest in any particular asset class, security or strategy. The information provided is for illustrative purposes only and should not be relied upon as a recommendation to buy or sell securities. Current forecasts provided for transparency purposes, are subject to change and are not guaranteed. Every effort is taken to ensure the accuracy of the data used in this document but no warranties are given.
For full information on the IFSL Evenlode Investment Funds, including fund risks and costs and charges, please refer to the Key Investor Information Documents, Annual & Interim Reports and the Prospectus, which are available on the Evenlode website. Recent performance information is shown on factsheets, also available on the website. Past performance is not a guide to future returns. Fund performance figures are shown inclusive of reinvested income and net of the ongoing charges and portfolio transaction costs unless otherwise stated. The figures do not reflect any entry charge paid by individual investors.
The IFSL Evenlode Investment Funds are subject to normal stock market fluctuations and other risks inherent in such investments. The value of your investment and the income derived from it can go down as well as up, and you may not get back the money you invested, you should therefore regard your investment as long term. As focused portfolios of between 30 and 50 investments, the IFSL Evenlode Investment Funds carry more risk than funds spread over a larger number of stocks. The IFSL Evenlode Investment Funds have the ability to invest in derivatives for the purposes of EPM, which may restrict gains in a rising market. Investments in overseas equities may be affected by changes in exchange rates, which could cause the value of your investment to increase or diminish.