Global Fund Update – January 2026
Following a difficult start in the first quarter, 2025 was another strong year for global equities. The Goshawk Global Fund returned just under 5% for Sterling-based investors, hampered by the weakness of the US Dollar and the continued weakness of the Japanese Yen.
Artificial intelligence has been the dominant theme for investors in 2025, and represents a sizeable percentage of our portfolio via investments in a number of companies that we see as the long-term winners from the implementation of AI, both for commerce and for the consumer.
In December, the Federal Reserve once again cut US interest rates for the third time in 2025, lowering the benchmark rate to 3.5-3.75%. A key question for the performance of equities in 2026 will be the continued battle between US growth, inflation and the labour market and what changes to policy a new Fed Chair brings as Jerome Powell ends his term. President Trump has suggested he will announce a successor to Powell in January, and it is well documented that he would like to see rates lowered more aggressively. Economic data released in December showed US GDP growth in the third quarter rising by a revised higher figure of 4.3%, the fastest pace in two years and well above expectations, raising questions about how much rates need to be reduced from current levels.
Stocks & Portfolio Moves
In Europe, interest rates were left on hold at the end of December and are likely to remain at the same level for some time, despite economic growth being tepid at around 1.4% for 2025 with no real improvement expected in 2026. Our European positions do not reflect a positive view of the European economy, which we expect will continue to be challenging and our holdings in the region reflect our investment strategy to own high quality global franchises.
Schneider Electric is a good example of this strategy and held its capital markets day in December, which highlighted the continuing opportunity that lies ahead from its strong position in electrification, a key theme in the portfolio. Management is forecasting 7-10% annual revenue growth, with improving margins and a higher return on invested capital. The company has tailwinds from the boom in AI data centres and is a key beneficiary of the increased use of electric power, which requires grid modernisation and increased energy efficiency. We are slightly surprised that Schneider shares did not perform better in 2025, but see the stock as very well positioned in 2026 and beyond.
The Bank of Japan continued its long-term strategy of monetary policy normalisation by finally increasing interest rates in December as the Yen continued to weaken and inflation remained well above their 2% target level. Japanese bond yields have continued to rise in recent months, with ten-year yields ending the year above 2% for the first time since 1999, and this is a situation we will continue to monitor closely in 2026.
We remain optimistic about our Japanese portfolio and added a new name at the end of the year by taking a new position in SMC Corporation. We believe the company will be a substantial winner from the increased use of physical AI, which is creating an inflection point for industrial robotics, a theme we have been adding to over 2025 through stocks like Yaskawa. SMC specialises in pneumatics, actuators and sensors which are all a key part of the factory automation value chain, so we see the company as very well positioned for growth and trading at an attractive valuation.
In China we added to our position in Baidu, which has been a more recent addition to our Chinese portfolio and has started to perform well after a prolonged period of underperformance. Baidu is undergoing a business transition pivoting to an AI-based strategy via cloud services, chip development and autonomous driving through Apollo Go, which is currently a small but rapidly expanding part of its business. Baidu is one of four names we own in China, where we have a balance between technology and financials, also owning Alibaba, China Life Insurance and ICBC. In December we modestly reduced our holding in China Life after a superb run in the stock and slightly added to our position in ICBC. We expect to see the Chinese authorities drive more policy initiatives to help stabilise the property market, which continued to struggle in 2025. Chinese government policy for growth is to stimulate increased consumer spending and we believe this will only be possible if the property market is able to show a level of stability that creates greater confidence in consumers’ financial position.
In 2025 we substantially re-shaped our healthcare portfolio and this continued towards the end of the year with the introduction of Merck and the sale of Carl Zeiss Meditec. We were very patiently awaiting a sustainable turnaround in fortunes at Carl Zeiss and although there was a glimmer of hope in its latest set of results, we were extremely disappointed that the company saw fit to reduce its dividend. We added Merck, which we believe has a materially underappreciated pipeline of new products that can sustain its business model even as its major blockbuster drug, Keytruda, sees a large sales erosion as it starts to come off patent. Merck has a strong balance sheet and cash flows that enable it to make acquisitions of firms that are in late-stage drug development and could prove highly value-accretive to the overall franchise. We see Merck as attractively valued, with a particularly good dividend yield and complementary to our other pharma names, AbbVie and Johnson & Johnson, the latter of which performed extremely well in 2025.
Accenture had a difficult 2025 from a share price perspective, but its recent results once again showed the resilience of its business model and the opportunity that lies ahead for the company as a digital consultant that helps businesses implement transformational technologies, such as the current boom in AI. While the market has fixated on the risks of disintermediation that the company may face from AI, we see the business as a winner, as it aids companies with the complex transformation to AI-centric strategies through cloud implementation and most areas of the commerce value chain. Accenture shares have been materially derated this year, but recent results showed growth in its order book and robust revenue growth of 6%, which we believe will be sustainable. Recently announced partnerships with OpenAI, Palantir and Nvidia highlight to us the continued relevance of Accenture as a crucial company as industry adopts one of the most transformational technology shifts in history.
Outlook
Equity markets rewarded investors in 2025 across the board: the UK FTSE ended the year at a new high and Japan finally surpassed the previous high from the 1980s. US equities dominated the news and technology stocks sent markets higher, but the weaker dollar dampened returns overall. Significantly, 2025 was a year where companies faced a range of unhelpful political challenges, but so far most have adapted smoothly and have not seen their prospects impaired.
We therefore look forward to 2026 with some confidence. The US president will likely be preoccupied with midterm elections and handling domestic cost of living issues, rather than shocking bond markets or tweeting tariffs. Possibly European governments will start to make further progress on defence spending. Asian economies will adapt to a world with tariffs by trading less with the USA and more amongst themselves.
We do find some of the world’s largest companies are on punchy valuations, but not as unmanageable as those in the 2000 dot-com bubble. As you would expect, we believe that our selected investments are on reasonable valuations and have good growth prospects. We therefore look forward to another year of attractive returns for unit-holders, but will continue to monitor developments and keep our portfolios balanced so that they can cope with unexpected developments.
Goshawk Asset Management
Data source: Goshawk Asset Management, Bloomberg
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