During February, our NAV return was 3.4% and shareholder returns were 3.6% in comparison to the FTSE All World return of 3.5%.

Global markets delivered positive returns in February, though regional and sector divergence intensified as the rotation away from large-cap technology stocks gathered further momentum. Cooling inflation data across major economies and growing scepticism about near-term returns from AI capital expenditure were prominent themes.

Japan (11.3% in sterling terms) was the standout regional performer following Prime Minister Takaichi’s landslide election victory, which bolstered expectations for sustained government support for the economy. The MSCI Emerging Markets Index gained 7.7% in sterling terms, extending its run of outperformance, led by Korea (24.4%) and Taiwan (14.7%), though China (-2.8%) detracted. UK equities gained 7.1%, benefiting from robust corporate earnings and the rotation away from AI stocks. Europe ex UK advanced 4.8% in sterling terms, supported by improving economic momentum and France’s adoption of a 2026 budget ending months of political deadlock. The S&P 500 proved the exception, gaining just 1.1% in sterling terms and declining 0.8% in local currency. The US Supreme Court ruling that the Trump administration’s use of emergency powers to impose broad-based tariffs was unconstitutional added further uncertainty, though weakness remained concentrated in mega-cap names. Over the month, the equal-weighted S&P 500 outperformed its cap-weighted equivalent by 4.3%.

Government bond yields fell across major markets as lower inflation and a broader risk-off mood supported demand for safer assets. In the UK, inflation fell to 3.0% in January and the Bank of England, while holding rates at 3.75%, signalled that a cut could follow in March, having also lowered its growth forecast and raised its unemployment outlook. In Europe, inflation fell to 1.7%, and the European Central Bank held rates at 2.0%, with President Lagarde noting that inflation was in a “good place”. In the US, signs of labour-market softening saw markets price in additional rate cuts, driving Treasury yields lower. Sterling reversed some of January’s gains, weakening approximately 2.0% against the US dollar over the month.

The overweight position in Howmet Aerospace (28.8%), a manufacturer of advanced engineered components for the aerospace and transportation industries, was a top contributor to excess returns. Howmet reported earnings that showed strong performance driven by accelerating demand across multiple end markets: commercial aerospace revenue grew 13% year-on-year, defence aerospace rose 20% and gas turbines surged 32%. The overweight position in Booking Holdings (-13.5%), an online travel agency, detracted from performance. Shares in Booking came under pressure amid broader concerns about AI-driven disruption to the travel and broader consumer services sector, with the stock declining despite reporting solid fourth-quarter results.

We ended the month at a discount of 7.8%, narrowing from 8.0% in January. Net gearing continued to be conservative at 3.5% (with debt at fair value) for month-end.

As at 28 February 2026