Global Income Growth

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<p data-start="182" data-end="943"><strong>Your capital is at risk. Past performance is not a guide to future returns. The following update is based on a representative portfolio. As such, stock examples may not be held in every client portfolio, and performance may differ.</strong></p> <p data-start="182" data-end="943"><strong>This transcript has been generated using AI.</strong></p> <div class="flex flex-col text-sm pb-25"> <div class="text-base my-auto mx-auto pb-10 [--thread-content-margin:var(--thread-content-margin-xs,calc(var(--spacing)*4))] @w-sm/main:[--thread-content-margin:var(--thread-content-margin-sm,calc(var(--spacing)*6))] @w-lg/main:[--thread-content-margin:var(--thread-content-margin-lg,calc(var(--spacing)*16))] px-(--thread-content-margin)"> <div class="[--thread-content-max-width:40rem] @w-lg/main:[--thread-content-max-width:48rem] mx-auto max-w-(--thread-content-max-width) flex-1 group/turn-messages focus-visible:outline-hidden relative flex w-full min-w-0 flex-col agent-turn"> <div class="flex max-w-full flex-col gap-4 grow"> <div class="min-h-8 text-message relative flex w-full flex-col items-end gap-2 text-start break-words whitespace-normal outline-none keyboard-focused:focus-ring [.text-message+&amp;]:mt-1" data-message-author-role="assistant" data-message-id="73040ef4-ba4c-4862-9a2b-80c85a04ff88" data-message-model-slug="gpt-5-4-thinking" data-turn-start-message="true"> <div class="flex w-full flex-col gap-1 empty:hidden"> <div class="markdown prose dark:prose-invert w-full wrap-break-word light markdown-new-styling"> <p data-start="176" data-end="866"><strong data-start="176" data-end="194">Thomas Hodges:</strong> This quarter felt like the title of the multi-Oscar-winning film, <em>“One Battle After Another”</em>. Markets moved rapidly from one concern to the next. First came a sharp sell-off in software and digital businesses, driven by fears that artificial intelligence could disrupt even the most well-established companies. And then, towards the end of the quarter, conflict in the Middle East triggered a surge in energy prices and a very different kind of market reaction. And your portfolio held up relatively well during the first phase, and that’s despite pressure on a number of software and data-related holdings. Performance was resilient and ahead of the index at that point.</p> <p data-start="868" data-end="1819">The second phase proved more challenging, as geopolitical tensions escalated and energy markets reacted, investors moved quickly and indiscriminately, and even areas of the market which have historically provided some degree of shelter, like consumer staples and healthcare, they came under pressure. But energy was the clear exception, benefiting from higher oil and gas prices. And because we had no direct exposure to that sector, this weighed on relative returns. And some of our European industrial holdings also struggled as the market began to worry about the effects of higher energy costs. And as a result, the weakness in March more than offset the relative strength earlier in the period, and the portfolio ended the quarter behind the index. And that’s a frustrating outcome, but it doesn’t change our confidence in the portfolio’s resilience in the face of future challenges, nor does it challenge our confidence in the process behind it.</p> <p data-start="1821" data-end="2465">So what I’m going to do now is touch on our thoughts regarding resilience and why we think we’re well positioned for the challenges ahead. And resilience is not just an accidental feature of how we invest, it’s actually something that we actively target. It’s reflected in our track record about performance in downturns. Of the 12 instances of greater than five percent market drawdowns in US dollar terms over the past decade, we’ve beaten the market in 10 of them. And our starting point is always deep fundamental research. We look closely at a company’s business model, its competitive position and its ability to endure through downturns.</p> <p data-start="2467" data-end="3430">We combine financial analysis with ESG inputs and work on corporate culture, and then assess each company through our GRIP framework, where we judge a company’s growth potential, its resilience, the sustainability of the income paid out and the total return potential. And that framework helps us judge whether a business can grow, but also whether that growth will be durable, and if the market is properly valuing it. And so when we find businesses that can grow earnings and income through the cycle, and where that resilience is underappreciated, we believe that creates opportunity. And that was particularly clear during the sell-off earlier in the quarter. When new AI tools were launched, the market quickly began to question the durability of many traditional software business models. Investors started worrying about pricing and could that come under pressure, customer churn could increase and the long-established competitive advantages might weaken.</p> <p data-start="3432" data-end="3913">And given the portfolio’s exposure to software and data-related companies, several holdings were caught up in the crossfire. But we believe that the market reaction was just too broad, too simplistic and also too harsh. Because the businesses that we own in this area aren’t easily displaced. Their products are deeply embedded in customer workflows. They control proprietary data, and they can’t simply be replicated by a new AI interface. And Microsoft’s a great example of this.</p> <p data-start="3915" data-end="4424">Its productivity tools and cloud services are woven into the daily operations of many businesses around the world, creating exceptionally high switching costs. And then there’s Experian, the credit data provider. Its data advantage rests on a consortium model where you have to give data to get data. And that’s really difficult to reproduce. And in our view, it’s highly resilient. And importantly, the operating results from many companies in this area have remained strong despite the share price reaction.</p> <p data-start="4426" data-end="5236">Amadeus, which provides the software backbone for much of the travel industry, continued to deliver solid growth in earnings, and it raised its dividend. Management recently spoke confidently about its competitive strength, including its role as a trusted system of record for its customers, its deep integration with them and the reliability of its global infrastructure. Intuit similarly reported strong results, the tax and accounting software company, despite a meaningful derating in its share price. And in both cases, we see companies which are delivering on the growth and income parts of the GRIP equation, but with valuations that no longer reflect the resilience of that growth. And so we saw an opportunity to generate strong total returns into the future. And so we added to both over the quarter.</p> <p data-start="5238" data-end="6023">But of course, when we’re thinking about resiliency, it’s not just about picking good companies one by one, it’s also about how they fit together. And we want different parts of the portfolio to work in different environments. So consumer staples, for example, generally perform well in downturns, and they remain a really important source of ballast. Businesses like L’Oréal and PepsiCo generate really strong cash flows, they’ve got pricing power and they continue to grow their dividends. And these are companies whose products remain relevant through changing economic conditions, and their scale and their financial strength give them the ability to reinvest for future growth. And similarly, our financial holdings provide some degree of balance as well, just in a different way.</p> <p data-start="6025" data-end="6793">We’re overweight financials, but that exposure is concentrated in exchange businesses, like Deutsche Börse and CME Group, rather than in banks. And these are highly profitable, cash-generative businesses with toll-road-like characteristics. They also tend to benefit when markets become more volatile as trading activity increases. And that was really reflected over the quarter with holdings like B3 and CME among the stronger contributors. And so these stabilising exposures sit alongside longer-term structural growth holdings, including the software companies, which I mentioned earlier, and also semiconductor companies like TSMC, MediaTek and others. But thinking about the more recent sell-off, it was certainly a different test of resilience for any portfolio.</p> <p data-start="6795" data-end="7627">And it was much less about company fundamentals and much more about sentiment and shifting perceptions around geopolitical risk. Markets were swinging sharply in response to the changing views on the conflict and what that might mean for energy suppliers. In that kind of environment, the market temporarily favours immediate, tangible value over future growth. But that’s exactly why we think this portfolio is really well positioned. The companies we own offer both value today and growth tomorrow, and that’s whether that comes from the traditional sources of balance, like Coca-Cola, or structural income-paying growers like Alphabet. These are companies which generate enormous levels of cash, and that supports attractive dividends and helps build fortress balance sheets, providing that value and resilience in the near term.</p> <p data-start="7629" data-end="8196">And then for the future, they reinvest a portion of those cash flows at high rates of return, meaningfully higher returns than the average company in the index. And that’s what provides the growth for tomorrow. So value today, growth tomorrow. Keeping steady in a changing environment is something we’d generally pay a meaningful premium for. But given the general derating of quality over the past 12 months, that premium is thinner than ever. But as complexity rises, we think this style of investing and this quality of portfolio will become much more appreciated.</p> <p data-start="8198" data-end="8576" data-is-last-node="" data-is-only-node="">And so while the quarter’s performance was disappointing, our broader perspective is unchanged. We continue to see a portfolio of resilient businesses, diverse growth drivers and valuations that in many cases have become much more attractive. Markets may continue to present one battle after another, but we believe the companies you own are well equipped for the battles ahead.</p> <p data-start="8198" data-end="8576" data-is-last-node="" data-is-only-node="">&nbsp;</p> </div> </div> </div> </div> </div> </div> </div> <h3 class="TABLEHEADER1212pt">Global Income Growth</h3> <p><strong>Annual past performance to 31 March each year (%)</strong></p> <table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 111px;"> <tbody> <tr style="height: 18.5px;"> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;">&nbsp;</td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2022</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2023</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2024</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2025</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2026</strong></td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">Global Income Growth Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">8.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-0.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">13.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">2.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">3.1</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">Global Income Growth Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">7.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-1.1</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">12.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">1.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">2.5</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">Responsible Global Equity Income Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">9.4</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-0.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">15.1</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">2.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">3.7</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">Responsible Global Equity Income Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">8.8</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-0.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">14.4</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">1.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">3.2</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">MSCI ACWI Index</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">7.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-7.0</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">23.8</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">7.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">20.5</td> </tr> </tbody> </table> <p>&nbsp;</p> <p><strong>Annualised returns to 31 March 2026 (%)</strong></p> <table border="1" style="border-collapse: collapse; width: 99.9907%; border-width: 0px; height: 92.5px;"> <tbody> <tr style="height: 37px;"> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 49.2742%;">&nbsp;</td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 11.3816%;"><strong>1 year</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 11.798%;"><strong>5 years</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 13.1862%;"><strong>10 years</strong></td> <td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; width: 14.2963%;"><strong>Since inception*</strong></td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 49.2742%;">Global Income Growth Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.3816%;">3.1</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.798%;">5.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1862%;">9.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">N/A</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 49.2742%;">Global Income Growth Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.3816%;">2.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.798%;">4.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1862%;">8.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">N/A</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 49.2742%;">Responsible Global Equity Income Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.3816%;">3.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.798%;">5.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1862%;">N/A</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">10.8</td> </tr> <tr> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 49.2742%;">Responsible Global Equity Income Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.3816%;">3.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.798%;">5.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 13.1862%;">N/A</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">10.2</td> </tr> <tr> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 49.2742%;">MSCI ACWI Index</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.3816%;">20.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.798%;">10.0</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 13.1862%;">11.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">13.5</td> </tr> </tbody> </table> <p><strong><br></strong>*Inception date for Responsible Global Equity Income: 31 December 2018.<br>Source: Revolution, MSCI. US dollars. Net returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised.<br>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp;<br><strong>Past performance is not a guide to future returns.</strong><br>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp;<br>Legal notice: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. 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