Brent Crude rose 41.92% over the quarter, which in turn stoked cost-push inflation concerns, and market expectations shifted towards further Base Rate rises. As discussed in previous issues, the portfolio carries meaningful exposure to cyclical and interest rate-sensitive stocks; as such, inflation concerns, coupled with rising Gilt yields, can negatively impact different components of the portfolio. 

Unlocking Value in UK Equities

Turning to the portfolio, the undervalued nature of the UK market was again evidenced as shares in Rotork, the maker of electric actuators and flow-control equipment (essential in data-centres), jumped 73% as ABB (a Swiss industrial technology company) bid for its entire share capital. With the deal not expected to close until H1 2027, we sold the position at a small discount to the bid price, netting a substantial profit in a short holding period. 

Shares in Bellway seemed to turn a corner (whisper it quietly), despite higher mortgage rates and affordability constraints continuing to weigh on demand. Government policy appears to have shifted, with the re-introduction of the Help-To-Buy equity loan scheme confirmed at the Labour Party Conference – one of the few profitable government policies of recent years. As written about on numerous occasions, housebuilder share prices are starting from an incredibly low price-book ratio. Consequently, this has positively affected adjacent companies, such as Breedon, the UK-listed construction materials company. 

Adding Exposure to Real Assets

One beneficiary of the increasing oil price has been Harbour Energy, which significantly upgraded its free cash flow outlook, from $600m in March to $1.8bn, a 200% increase. Strong production and higher oil and European gas prices have driven the upgrade, while the completion of the $3.2bn LLOG acquisition has added a high-margin, oil-weighted Gulf of Mexico business. Despite the acquisition initially increasing leverage, the company is now using its stronger cash generation to accelerate debt reduction, while also funding a new $250m buyback.  

We initiated a new position in Fresnillo, the world’s largest primary silver producer and Mexico’s second-largest gold miner. Fresnillo is a world-class business with irreplaceable assets, exceptional ore grades, a pristine balance sheet, low-cost operations and a meaningful exploration pipeline. The disconnect in valuation versus its peers, the significant de-rating of its share price from January 2026 highs, and significantly less inflated precious metal pricing (again versus January 2026) create an enticing entry point. 

A Challenging Quarter for Several Holdings

However, four positions alone accounted for a combined, weighted -2.29% drag on performance. Names in financials and pharmaceuticals were the main laggards. AstraZeneca fell ~13% as an unexpected failure in its Phase III trial for Wainua (cardiovascular disease), coupled with (subsequently denied) acquisition rumours for Bristol Myers Squibb weighed on its share price. Barclays also detracted from performance as rising Gilt yields and rumoured additional bank taxes ahead of the Autumn Budget overshadowed strong H1 results. IG Group fell following the announcement of its $1.3bn acquisition of Underdog, with investors questioning the scale and strategic risk of the move into US prediction markets. This was compounded by an unscheduled trading update that revised down growth guidance, after over-the-counter derivative revenue retention came in lower than expected due to technicalities in hedging strategies. Despite this, customer activity continues to grow strongly, and we added to the position on this share price weakness. 

Notwithstanding the above, it should not be overlooked that this is a multi-asset portfolio, with a fixed interest book used to add diversification, reduce volatility and enhance yield. To that end, we took the opportunity to add Nuveen and Hiscox new issues to the credit book, paying coupons of 6.052% and 5.875% respectively. The fund went XD at the end of September, and the dividend has grown 6% from the previous comparable period. 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.