July Report

Market Review

Global equity markets were broadly flat in July, though beneath the surface there was considerable dispersion as investors continued to reassess expectations for AI-related demand. Volatility persisted throughout the month, driven by growing debate over whether the pace of investment in AI infrastructure could be sustained.

Information Technology declined as AI-related shares came under pressure. Semiconductor stocks were particularly weak, with memory chip manufacturers selling off sharply after a strong run into mid-June. Investors reassessed lofty expectations for AI-related memory demand and pricing, prompting a reset across the sector. Semiconductor equipment makers also fell as the broader repricing of AI enthusiasm weighed on capital spending expectations.

Energy was the standout performer, rising 12% as geopolitical tensions flared once more. A fresh exchange of attacks between the US and Iran led to another closure of the Strait of Hormuz, pushing Brent crude prices higher and lifting energy shares broadly.

Regional performance diverged. Emerging Markets was the weakest region, dragged down by South Korea, where the concentration of memory chip manufacturers left the market particularly exposed to the reversal in AI-related sentiment. Developed markets held up better, supported by the rotation within technology from semiconductors and hardware toward software and services, where earnings visibility appeared more resilient.

Portfolio Commentary

The Fund returned 0.0% in July, outperforming the benchmark, which fell 1.3%. The Fund’s diversified positioning within Information Technology, which had detracted heavily from relative returns in the first half of 2026, proved helpful during the month as software and services stocks broadly outperformed semiconductors in a sharp reversal from earlier in the year. The Fund’s software holdings returned nearly twice those of the index.

Adobe and Accenture, both of which had been weighed down by fears of AI-related disruption earlier this year, were the standout contributors, rising more than 20% and 30% respectively. Elsewhere in IT, the absence of memory chip manufacturers SK hynix and Micron Technology from the portfolio supported relative returns and more than offset the drag from the Fund’s exposure to Samsung Electronics. NVIDIA and Broadcom also contributed positively, edging higher against the backdrop of a sharp sell-off across semiconductor and hardware peers.

Within Consumer Discretionary, shares of Sony rallied after the company raised its annual forecasts on the back of earnings growth in its music and image-sensor businesses. The absence of Tesla from the portfolio also boosted returns in the sector. Offsetting some of these gains, the Fund’s underweights in strongly performing pockets of the market, notably Financials and Energy, weighed on relative performance.

During the month, the Fund initiated a new position in Lenovo, the China-based company that is one of the world’s largest producers of personal computers, servers, and storage systems. Over the past several years, Lenovo has effectively leveraged its cost, supply, and technological advantages to raise its share and margins in both the server market and the enterprise solutions and services market, which includes providing ongoing IT, cloud architecture, and AI support. Lenovo’s uniquely global management team, with headquarters in both the US and China, combined with its industry-leading compliance record, helps to reduce political risk. The team believes Lenovo’s future growth will be driven by the ongoing retirement of Windows 10 systems and the growing need for on-premise AI and private cloud servers.