Global equity markets extended their upward momentum through the third quarter, with the MSCI All Country World Index advancing 7.7% (USD) by the end of September. In contrast, fixed income returns were subdued, as the Bloomberg Global Aggregate Index delivered a modest gain of just 0.6%. The asset class was weighed down by a rising term premium, reflecting growing fiscal concerns - particularly across developed markets - where elevated debt levels and persistent deficits have begun to exert upward pressure on long-end yields.

Global trade volumes remained under pressure, with US goods imports notably below their March peak. This decline reflects front-loaded purchases ahead of the implementation of erratic trade tariff policies. While the effective global tariff rate has moderated somewhat since early April, legal challenges persist. A federal appeals court recently ruled the tariffs unlawful, arguing that presidential authority to impose them was not granted by Congress. The Trump Administration is now contesting this decision in the US Supreme Court. Importantly, the declining share of goods production and trade in global GDP has helped cushion the broader economic impact of these tariffs.

It is worth noting that coincident economic indicators have remained stable, supported by the robust income and balance sheet position of the US consumer.

The US Federal Reserve - central to setting the global cost of capital - revised its forecasts during the quarter, raising its 2026 PCE inflation projection to 2.6% (from 2.4% previously). Encouragingly, they also upgraded the growth outlook across the forecast horizon, while simultaneously lowering expectations for both the unemployment rate and the federal funds rate. Fed Chair Jerome Powell has sought to anchor long-term inflation expectations by characterising the tariff impact as a one-off, short-term shock, akin to those seen during Trump’s first term. Notably, in his Jackson Hole speech, Powell signalled a shift away from the Fed’s average inflation targeting framework, reaffirming a renewed focus on maintaining stable long-term inflation expectations and labour market stability.

Efforts by the Department of Government Efficiency to curb fiscal slippage have delivered only modest results, with savings totalling just USD 206 billion as of 30 September. The proposed “One Big Beautiful Bill” may further complicate consolidation efforts, adding uncertainty to the fiscal outlook. Nonetheless, markets have found some reassurance in the administration’s renewed push to revive the narrative of US exceptionalism. Still, elevated government spending continues to exert upward pressure on yields - particularly at the long end of the sovereign bond curve - underscoring persistent concerns around fiscal sustainability.

A similar dynamic is playing out in Japan, where the 30-year government bond yield surged to a record high of 3.293% in September, reflecting mounting concerns over debt servicing costs and long-term fiscal sustainability. Adding to the pressure, the Bank of Japan announced a phased reduction in its government bond purchases - cutting JPY 400 billion per quarter through March 2026, followed by a slower taper of JPY 200 billion per quarter until March 2027. In a further step towards policy normalisation, the central bank also committed to selling JPY 330 billion in exchange-traded funds annually and JPY 5 billion in real estate investment trusts, signalling a gradual unwind of its balance sheet and a shift away from ultra-accommodative monetary policy.

European equity markets posted more modest gains over the third quarter, with the MSCI Europe Index rising 3.5%. Sector performance was mixed: Communication Services, Real Estate and Consumer Staples declined while Financials and Energy outperformed. Within the Consumer Discretionary sector, German automakers such as Porsche and Volkswagen remained under pressure from sluggish electric vehicle demand, intensifying competition from Chinese manufacturers and a complex tariff landscape. Encouragingly, economic data surprised to the upside, but this resilience - coupled with fiscal concerns - has contributed to a rising cost of capital as European bond yields broadly moved higher.

The UK also delivered stronger-than-expected economic data, with the MSCI UK Index climbing 5.9%, led by the Materials and Healthcare sectors.

Emerging markets (EM) showed resilience, with the regional MSCI EM Index advancing 10.9%, bolstered by a standout performance in China where the MSCI China Index surged 20.8%. The People’s Bank of China unveiled a comprehensive 10-point monetary policy plan aimed at boosting investor confidence and stimulating domestic demand. Early signs of recovery are emerging, particularly in total social financing data, which suggests that credit growth may begin to support broader economic activity in the quarters ahead. While geopolitical risks remain elevated, we remain cautiously optimistic that these policy measures will help foster greater market stability and underpin a more durable recovery.

Looking ahead, we believe US President Donald Trump’s policy decisions will remain a key driver of global asset market trends. Recent developments suggest a growing tilt towards Wall Street-friendly policies, potentially at the expense of Main Street. However, the range of possible economic outcomes remains unusually wide. We remain vigilant to the risk of abrupt and significant policy shifts in the months to come.

Fund strategy

The Ashburton SICAV Multi-Asset Fund range is managed using a core-satellite approach, underpinned by a detailed look-through of the underlying building blocks to ensure optimal diversification. The equity allocation is primarily anchored by two flagship strategies: the Ashburton Global Equity Growth Fund, which targets companies with robust free cash flow potential, and the Ashburton Global Leaders Fund, now managed by Morgan Stanley Investment Management, which focuses on high-quality businesses with the ability to compound intrinsic value over time.

From an asset allocation standpoint, we modestly increased equity beta relative to the previous quarter - a decision that proved effective over the review period. While the policy outlook under the Trump Administration remains highly uncertain, we believe the distribution of risks is increasingly skewed to the upside. Recent developments such as accelerated deregulation, the prospect of more expansive fiscal stimulus, and the pragmatic rollback of previously proposed, economically detrimental policies have introduced meaningful upside risks to the global economic outlook relative to prevailing market expectations. These dynamics contributed to our decision to also reduce exposure to the Ashburton Global Leaders strategy during the period.

On the fixed income front, we remain cautious of rising term premiums in developed markets, driven by growing fiscal concerns. As such, we continue to limit duration risk and favour unconventional fixed income exposures in the US, including:

• A bond steepener to benefit from a widening yield curve amid rising term premiums,
• US high-yield bonds, supported by a stronger-than-expected economic backdrop,
• US convertible bonds, offering upside participation with a bias toward technology and consumer discretionary sectors, and
• Short-term TIPS, to capture short-term inflation carry.

We also maintain a meaningful allocation to strategic hedges, most notably gold, and continue to favour alternative strategies - particularly a market-neutral long/short fund – for diversification purposes. This strategy has demonstrated strong outperformance over longer time horizons.

Looking ahead, a significant portion of the Fund’s positioning will continue to be guided by our assessment of the probability, sequencing, and scale of forthcoming policy actions. Given their potential to materially influence both tactical decisions and long-term strategic asset allocation, these policy dynamics warrant ongoing, rigorous evaluation.

Fund performance

The USD Global Growth Fund advanced 6.6%[1] over the quarter, while the USD Global Balanced Fund rose 5.2%, outperforming their respective Morningstar peer groups, which returned 5.4% and 4.1%. This outperformance was primarily driven by our decision to further increase equity beta relative to the previous quarter, capitalising on the resilience demonstrated during earnings season.

Strategic hedges - most notably gold - also contributed positively to performance. The iShares Physical Gold ETC surged 16.7% in Q3 2025, reinforcing its role as a defensive asset amid geopolitical uncertainty.

From an equity building block perspective, we were encouraged by the continued uptrend in the Ashburton Global Equity Growth Fund, with standout contributions from Chinese equities - particularly Alibaba - as well as our recent addition of Nebius Group.

Conversely, performance was held back by the Ashburton Global Leaders Fund, where certain stock selections underperformed expectations. In response, we reduced exposure to this building block. Both multi-asset funds achieved first quartile performance for the quarter, reflecting the effectiveness of our tactical positioning and active management decisions.

Disclaimer:

Waystone Management Company (Lux) S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF) (ref A00000395 & S00000734), Waystone Management Company (Lux) S.A. is a company located in Luxembourg, L-1273 Luxembourg at 19, Rue de Bitbourg. This document is issued by Ashburton (Jersey) Limited (The Investment Manager) which has its registered office at IFC1, The Esplanade, St Helier, Jersey JE4 8SJ, Channel Islands and is regulated by the Jersey Financial Services Commission. Ashburton Investments is a registered trading name of Ashburton (Jersey) Limited. In the event a potential investor requires material risks disclosures for the foreign securities included in a portfolio, the manager will upon request provide such potential investor with a document, outlining potential constraints on liquidity & repatriation of funds; Macroeconomics risk; Political risk; Foreign Exchange risk; Tax risk; Settlement risk; and Potential limitations on the availability of market information. The value of participatory interests and the income from them may go down as well as up and is not guaranteed. Past performance is not necessarily a guide to the future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. CIS portfolios are traded at ruling prices and can engage in borrowing and scrip lending. A full detailed schedule of fees, charges and commissions is available from Ashburton on request and incentives may be paid and if so, would be included in the overall costs. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The manager has a right to close the portfolio to new investors in order to manage the portfolio more efficiently in accordance with its mandate. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton Investments is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient. The original recipient is solely responsible for any actions in further distribution of this document and should be satisfied in doing so that there is no breach of local legislation or regulations. This is a marketing communication. Additional information about this product, including brochures, application forms and annual or half-yearly reports, can be obtained from the Manager, free of charge, and from the website: www.ashburtoninvestments.com. In South Africa, the Fund(s) is/are approved for promotion under section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and changes, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (“Ashburton CIS”), 3 Merchant Place, 1 Fredman Drive, Sandton 2196. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa.