Performance, Commentary & Portfolio

Fund Manager’s Review

Events in the Middle East dominated headlines throughout March. The attack by the US and Israel on 28th February killed the Iranian Supreme Leader and other senior military heads in addition to targeting infrastructure. This led to retaliatory strikes by Iran across Gulf states that they perceived to be helping the US, and an almost total blockage of the Strait of Hormuz. This vital shipping lane handles around one-fifth of the world’s energy exports and is also a key route for other important materials such as fertilisers and helium. Oil prices surged to their highest levels since the Ukraine War. The International Energy Agency said that the war with Iran represented “the largest supply disruption in the history of the global oil market”

The response in the financial markets was swift. US Treasuries sold off in one of the worst monthly performances of recent years as inflation expectations soared and any hope of imminent rate cuts were abandoned. Investors are now projecting an increase in borrowing costs in the UK, a significant change from the rate cuts for 2026 that were anticipated at the beginning of the month. Central Banks face a major dilemma; higher energy prices and trade interruptions threaten higher inflation, whilst lower confidence and the tax like impacts of higher oil prices challenge growth forecasts. Given the need to prevent an inflationary spiral, tighter monetary policy is the normal outcome.

Only the Energy sector ended the month in positive territory, boosted by the high oil price. Utilities were the next best performer, whilst rate sensitive areas of the market such as Industrials posted the biggest losses. All major indices retreated, but it is worth noting that the UK is one of the few with positive performance since the turn of the year. The UK market composition has a high weighting to the Energy sector and a skew towards the value end of the market which has comfortably outperformed both growth and quality indices of late.

The portfolio performed ahead of its blended benchmark in March, boosted by long term energy holdings TotalEnergies (France), Shell (UK) and the more recently acquired ConocoPhillips (US) which all returned more than 15% over the period. Brunner’s Net Asset Value (NAV) total return for February was -5.2%, ahead of the benchmark return of -5.6%. Certain holdings in the Financials sector also performed well. IG Group, the UK listed leader in online financial trading, reached an all-time high in the month. The company reported strong financial results for 2025 and suggested revenue growth would be at the top end of it’s 2026 guidance. UK insurer Admiral was another holding in this sector where shares performed strongly after solid 2025 financial results and a number of analyst upgrades.

Kia Corp was the biggest single detractor in March, but remains one of the strongest holdings year to date. The Korean indices had performed exceptionally in the first two months of the year and the risk off sentiment after the outbreak of the Middle East conflict resulted in investors taking profits. Kia fell in line with the index, with an absence of any negative company specific news flow. Schneider Electric, Barratt Redrow and Assa Abloy also underperformed, operating in areas of the market that are most sensitive to interest rate rises and negative sentiment around economic growth forecasts.

We initiated two new positions in March: US listed accountancy firm CBIZ and UK listed aerospace business Melrose.

CBIZ is one of the largest accountancy firms outside the ‘big four’. 70%- 80% of their revenues are from routine audit and accountancy work which is generally sticky due to customer relationships and regulatory requirements. The second part of the business is more cyclical in nature with a portion related to capital markets activity. In the past 12 months, the equity has de-rated significantly as the discretionary side of the business has seen a downturn. At purchase, the company has a forward free cash flow yield of about 20% based on current consensus estimates. Whilst the company carries some debt, the significant cash flow allows it to be paid down quickly. A forward P/E (price-to-earnings ratio) of 7x provided us with a very attractive entry point with the possibility of a rerating if the balance sheet improves.

Melrose make vital components found in most of the world’s jet engines. When these engines are initially being developed, Melrose contributes to the huge cost via ‘RRSPs’ (risk and revenue sharing partnerships) with manufacturers such as GE, Rolls Royce and Pratt and Whitney. In return, Melrose receives a share of the revenues associated with each engine, including aftermarket spares, servicing etc, for the engine’s life, which can be many decades once in operation. We believe Melrose could be on the cusp of an inflection in cash flows, with development costs declining and cash from these RRSPs rising sharply.

Amphenol, a designer and manufacturer of connectors, cables and interconnects that are in high demand for datacentres, was sold. The valuation had become stretched in our view, and there is an overhang on how emerging photonics technology could diminish the need for copper architecture on AI racks. We also trimmed our energy holdings after prices surged in response to events in Iran and reduced the exposure to semiconductor capital equipment maker ASML.

Julian Bishop & James Ashworth
9 April 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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