We lagged the headline market indices due to our more diversified nature, having a wider spread of sector exposures and so a relatively lower weight to semiconductors (where most of the AI excitement is). 

Staying Disciplined in an AI-Fuelled Market

We applaud these semiconductor names for their innovation and growth and have exposure to the space through our investments in Nvidia, Broadcom and Taiwan Semiconductor, but are not about to throw caution to the wind when it comes to suitable risk management to chase short-term returns. As regular readers will know, we aim to deliver long-term growth for Esk holders through a diversified portfolio of the highest quality global businesses, in periods of market exuberance we may not capture all the market upside, but in tougher times the benefit of our disciplined risk management has proven prudent. 

With that in mind, we sought to further diversify our exposure in the quarter, adding three new positions and exiting the same number. ExxonMobil, the oil major, returns to the Fund for the first time since 2019. With the oil price having retreated to what we see as a reasonable level, we see this as an attractive entry point into a business sitting on producing oil fields in the US and Gulf of Mexico that have key strategic global value. Amphenol also comes in, the US-listed manufacturer of electrical interconnectors and sensors used in a huge range of applications, from drones, to electronic vehicles, to data centres. Finally, we introduced a position in Franco-Nevada Corporation, who provide funding to precious metal miners in returned for royalty rights. This gives Esk exposure to the gold price, without the asset-intensive risk attached to owning a miner directly.

Portfolio Evolution: New Opportunities and Selective Exits

We sold Oracle which had been in the Fund since 2011 and generated handsome returns as we feel they are now overstretching their balance sheet to keep up with their larger rivals in data centre build-out. Intuit, held since 2019, goes after disappointing results failed to disprove naysayers that think that AI will replace their software-based business model and, lastly, we sold our small position in Kraft-Heinz. We purchased Kraft-Heinz last year because we felt shares were undervalued and saw the upcoming break-up of the business into two as a catalyst for upward re-rating – management subsequently halted demerger plans and so we saw no reason to remain holders.

Aside from the Tech sector, our top performers in 2026 have been our bank holdings, with Sumitomo Mitsu Financial, Standard Chartered and Morgan Stanley all rightfully climbing up the list of our largest holdings. These businesses are benefitting from both higher interest rates on their lending and more trading activity on the investment bank side. We expect rates to remain structurally higher for the foreseeable future and so are happy to maintain these weights – it is a lucrative time to be a bank.

Our insurance names Everest Group, Swiss Re and Berkshire Hathaway remain under pressure from declining premiums and latent overcapacity in several of their risk markets. We continue to see these three as best in breed and well capitalised from when the cycle does turn – this is not their first rodeo.
 

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.