Performance, Commentary & Portfolio

Fund Manager’s Review

Vladimir Lenin’s adage that “there are decades where nothing happens; and there are weeks where decades happen” rarely felt more descriptive than in January. The month began with the cinematic capture of Nicolás Maduro in Venezuela, followed by geopolitical tension over Greenland. Donald Trump’s renewed desire to “own” the world’s largest island—and his subsequent threats of punitive tariffs against those allies who demurred – turned the World Economic Forum in Davos from a networking gala into a high-stakes crisis summit. For the global elite, the fresh air of the Swiss Alps offered little relief from the stench of a burgeoning trade war and the fraying of the post-war order.

There was also drama in the central banking world. While the Federal Reserve opted to keep interest rates on hold at 3.50% – 3.75%, any picture of unity was punctured by two vocal dissenters, including Stephen Miran who President Trump recently added to the committee. Markets understandably started to fret about the independence of the Federal Reserve. In this context, the nomination of Kevin Warsh on January 30th to succeed Chairman Jerome Powell was reassuring. It would seem he is no puppet; rather, he is a deeply experienced, serious candidate with a reputation for monetary conservatism. Given deepening concerns around the integrity of American fiat (i.e. paper) money, his pending appointment provides a relief. ‘Hard’ forms of money such as gold and silver that had seen dizzying rallies supposedly driven by a need to protect against monetary debasement sold off.

Global stock markets rose slightly during January in sterling terms. Continuing the pattern of recent months, the US was a relative laggard, with the UK and European markets outperforming. In January, UK and European markets rose around 3% in sterling terms, while the US market was slightly down by a little over 1%.

Brunner’s Net Asset Value (NAV) total return for January was 1.77%, modestly ahead of the benchmark return of 1.58%. The largest positive contributors to performance were varied, across a range of sectors and geographies.

The largest positive contributor to performance in January was ASML, which rose over 30% in the month. Rapid demand for both artificial intelligence (AI) compute capacity as well as soaring memory prices is driving strong investment into semiconductor manufacturing capacity, benefitting ASML, which makes lithography machines critical to the production process. Another significant positive contributor was Kia Corporation, which benefitted from a strong equity market performance in South Korea and a well-received demonstration of humanoid robots from Boston Dynamics which it partly owns. Apple (not owned) and SSE Plc also contributed. Utility SSE continued to rally following the outline of its multi-year growth and investment plan in November, coupled with a general enthusiasm for all things electric.

Negative contributors to performance were varied, but a number of them were caught up in market concerns around the impact of AI. The single largest detractor was Microsoft, which declined after announcing cloud revenue growth in the last quarter of 2025 that, at “only” 38%, fell slightly short of bullish investor expectations. Investors were also stunned by a more than 60% increase in capex spending as Microsoft pursues AI opportunities. Given much of this investment is intended to serve lossmaking OpenAI it raised legitimate questions around capital allocation policies and the likely return on that investment. Elsewhere, Paycom Software, Roper Technologies and AutoTrader were all among the largest detractors in the month, driven by investor fears around AI disruption. We continue to closely monitor this technological change: while we recognise that AI is a revolutionary technology, we think incumbents who benefit from strong market positions, proprietary data, domain knowledge, and customer relationships should be well protected.

There were 3 new positions acquired by the Trust in the month. At a time of significant uncertainty about disruption risk to asset light businesses, all 3 new acquisitions are reassuringly capital intensive and hard to disrupt.

ConocoPhillips is a leading global independent exploration and production company with a diverse portfolio of projects primarily in the US, where production costs are low and shareholder protections are strong. The company is currently investing significantly in a new project in Alaska (Willow), which we believe could lead to a very significant increase in cash flows later this decade. Due to over-supply fears, energy stocks have been out of favour in recent months, giving the Trust what we believe to be an attractive long-term entry point.

In the banking sector, new positions were acquired in Lloyds Bank in the UK and Wells Fargo in the US. In both cases, cash flow generation is strong and expected to rise: in Lloyds’ case driven by repricing of low yielding investments made when interest rates were lower, and in Wells Fargo’s case following the removal of regulatory restrictions and costs that followed a mis-selling scandal nearly a decade ago. We simultaneously reduced our large stake in Bank of Ireland, diversifying our risks.

These new investments were funded by small reductions in a number of holdings most exposed to the AI boom (ASML, Microsoft, Taiwan Semiconductor, Alphabet, Atlas Copco), as well as some individual stocks that had either had good performance or where our conviction had decreased (AJ Gallagher, Intercontinental Hotels, Ametek). The Magnum Ice Cream Company, shares in which the Trust received last month following a demerger from Unilever, were also sold.

Julian Bishop & Christian Schneider
16 February 2026

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.

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