Performance, Commentary & Portfolio

Fund Manager’s Review

In our annual report, we commented on the unusually wide disparity between American and European sentiment, and equity valuations. The speed with which that disparity has narrowed has nonetheless been surprising. So far in 2025, European markets are up over 7% in GBP whilst the US S&P500 is down by a similar amount. President Trump’s erratic policy making is clearly unnerving American consumers and businesses, who appear to be delaying spending decisions as a result. Meanwhile in Europe, Germany announced a large fiscal stimulus, centred on defence spending and infrastructure. This encouraging step, easily affordable given Germany’s historical prudency, saw rare enthusiasm return to local markets.

At investment conferences we attend, the talk of recession is cropping up in America more frequently, a sharp turnaround from the extreme bullishness immediately after Trump’s election. Tariffs are almost universally derided as damaging for all, yet Trump appears set on pressing ahead with their implementation. The Washington Consensus that has permitted global free trade for decades appears to be over, for the time being at least.

Surprisingly, few of our investments physically export to the US, and where they do the production bases tend to be shared by their competitors. This means it is probable that tariffs will simply be passed on to consumers. Generally, given Brunner’s skew to higher quality businesses with predictable cash flow streams and less levered, lower risk equities, fear of a recession suits the Trust’s relative performance at least. Whilst NAV was down in the month, it fared considerably better than the market. The Net Asset Value (NAV) total return for March was -4.28% versus -5.30% from the benchmark index.

Key contributors to performance in the month included Norwegian bank DNB, where higher European interest rates bode well for profitability. Other positives included insurers American Financial and Munich Re, both defensives with little economic sensitivity. Not holding a few of the larger technology stocks such as Nvidia, Meta and Apple also helped, in stark contrast to the drag on our relative performance they represented last year.

Unsurprisingly, some of the key detractors were US exposed cyclicals. Intercontinental Hotels, for example, depends on business and leisure travel. Industry data provides clear evidence that activity here is slowing. Align Technology is best known for its Invisalign orthodontic teeth straightening treatments, which are often cosmetic and therefore discretionary in nature. We would expect to see sales estimates fall as the economy deteriorates. Other detractors included some of our tech holdings such as Taiwan Semiconductor Manufacturing Co, Microchip and Alphabet. Economic cycles are a fact of life and not something we believe we can predict in a useful way. We construct our portfolio to ensure we do not have undue sensitivity to macro conditions relative to equity markets more broadly. Our reaction to a slowdown is therefore to sit tight and look for opportunities.

We added one new name to the portfolio during the month, South Korea’s Kia, which is part of the Hyundai group, and together they are the third largest automotive producer in the world. We are under no illusions about how tough the car industry is. Given a very low valuation multiple and a clear, appropriate dividend policy we decided to take a stake. Whilst it is probable that tariffs will materially hurt profitability in the key US market, we infer this is already digested by the market. This investment brings additional value to the portfolio, reflecting our belief that a balanced approach is best.

We also added to SSE, the UK electrical utility, during the month. The stock had been weak on the back of higher interest rates. These purchases were funded via trims of some of our better performing names such as Bank of Ireland, Visa, and US listed insurance broker AJ Gallagher amongst others.

Julian Bishop & Christian Schneider
31 March 2025

This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.

Awards & Ratings