May Report

Market Commentary

Global share markets rose strongly in May, with the US leading the way. Investors responded positively to a steady flow of company earnings reports, particularly from large technology businesses. This helped ease concerns about global trade tensions and uncertainty around government policies in the US.

In Europe, markets also performed well. The region continued to benefit from a stable economic backdrop and a weaker US dollar, which makes European exports more competitive. Emerging Markets delivered more modest returns, as gains in some areas were held back by ongoing weakness in Chinese shares.

Technology was the strongest-performing sector, as investors grew more confident in the long-term growth of areas like artificial intelligence and digital infrastructure. Health Care, by contrast, was the weakest sector for the month. Some companies reported softer earnings, while news of potential changes to health policy in the US also weighed on investor sentiment.

Despite some lingering uncertainties, markets were supported by solid business results and improving confidence. While short-term movements are always possible, we continue to focus on long-term trends and the strength of individual businesses.

Portfolio Commentary

The portfolio delivered a strong return in May but underperformed the broader global market. This was mainly due to a handful of Health Care companies that faced short-term challenges. While disappointing in the near term, these outcomes reflect our ongoing focus on quality and resilience over chasing short-term market trends.

The largest detractor was UnitedHealth Group, a leading US health insurer. The company’s share price fell after reports of a potential regulatory investigation and growing uncertainty around the outlook for its Medicare Advantage business. Given the added risks to future earnings, we made the decision to exit the position during the month.

Other healthcare holdings also struggled. Vertex Pharmaceuticals, a US biotechnology company focused on cystic fibrosis treatments, declined after reporting earnings that fell short of expectations. Alcon, a Swiss eye care business, adjusted its forecast for the year due to weaker-than-expected demand, which it partly attributed to the impact of global tariffs.

Despite these headwinds, the portfolio benefited from strong contributions elsewhere. The Trade Desk, a US-based advertising technology company, performed particularly well after announcing strong revenue growth driven by continued demand in connected TV and digital advertising. NVIDIA, the US chipmaker known for its leadership in artificial intelligence and graphics processing, also added to performance following the release of a record earnings report.

During the month, the portfolio added a new investment in Visa, a global digital payments company operating in more than 200 countries. We believe Visa is well positioned to benefit from the continued shift away from cash and has the scale, technology, and financial strength to grow sustainably over the long term.

The investment team also continued its engagement with portfolio companies on key environmental, social, and governance (ESG) topics. During the first quarter of 2025, these discussions included Sony’s approach to managing supply chain risks from tariffs, Applied Materials’ efforts to attract engineering talent, and Compass Group’s workforce adjustments. These conversations form part of the team’s ongoing focus on understanding how businesses manage long-term risks and create sustainable value.

Overall, the portfolio remains focused on high-quality companies with strong fundamentals, aiming to deliver reliable income and capital growth for investors over time.