It has been a manic few weeks of news, but we have a long weekend, the sun is out (for now), and King Charles’s triumphant visit to the US has given us something positive and refreshing to talk about. Wasn’t he just great?
Taking Stock
A temporary stalemate in the Iran US conflict gives us a chance to take stock of the impact of recent events on investments markets.
Energy prices are up, from jet fuel to natural gas and petrol. Some are up more than others, but most have doubled from where they were at the start of the year, although gas prices have not spiked like they did when the Russian Ukraine conflict started.
This is feeding inflation. The indicators we have are all lagging measures but are already ticking up in Europe and the US – we can expect them to rise further.
Interest rate cuts, which were expected, have been put on hold and bond yields have moved up by around 0.75% across all durations.
Equity markets have rebounded from the early April falls, more strongly in the US than elsewhere in the world. However, US markets had been lagging behind in the first three months of 2026, so year to date returns have just levelled up a bit. It’s worth noting recent Q1 earnings in the US appear to have been strong enough to support current values.
Our portfolios have recovered more than half their losses since the April falls leaving our Balanced Multi Asset portfolio up around 3.5% in 2026 so far and around 16% over one year after fees. Given what’s been going on, we are pretty happy with that.
Thoughts on Fixed Income
I posted two charts on fixed income returns on LinkedIn this week after in-house discussions prompted strong interest, especially from our younger advisers.
Chart 1: Passive vs active fixed income investing
Source: Morningstar, 31/03/2021-31/03/2026, Daily, Total Return % (GBP)
The LinkedIn post is here and highlights the yawning gap between our fixed income returns over the last five years and those of fixed income indices tracked here by Vanguard, and used extensively in their hugely successful, but recently underperforming, LifeStrategy multi asset funds.
Chart 2: Highlighted bonds vs equities in the first 17 years of the 21st century
Source: Morningstar, 31/12/1999-29/12/2017, Daily, Total Return % (GBP)
The LinkedIn post is here, which, whilst not quite breaking the internet, has been going a bit viral after getting reposted by an investment analyst in Hong Kong in the early hours of this morning.
It is a good reminder on the risks of fixed income versus equities. Whilst both investment classes can at times be quite volatile in the short term, it is the contractual and calculable returns of fixed income which help it recover losses faster and deliver a much more predictable return.
If you are on LinkedIn please have a read of the posts, and if you were to ‘like’ or leave a comment that would be much appreciated, as I’m told that helps promote them up the LinkedIn algorithm!
Value Equity Investing
Tideway Selected Value Managers vs MSCI World Index and Quality Growth Managers last 5 years
If any of you have spent time with our investment director Nick Gait (I recommend you do!) you will know how passionately he talks about and how much work he has done on this subject.
It is not new. Value investing is attributed to Ben Graham, who published ‘The Intelligent Investor’ in 1949, which in turn is believed to have shaped Warren Buffet’s thoughts on how to invest, which as we know has worked out pretty well.
The concept is simple, putting it into practice less so. The clue is in the name. As well as considering how good a company is at generating profits and looking at its prospects for growing those profits, value investing theory tells us it is also critically important to consider the price of the shares you are buying and hence the value you are implying for the whole business.
Even the shares in the greatest business in the world, if bought too expensively, might not generate great returns. Or, conversely, even the shares in a run-of-the-mill company, if bought relatively cheap, can deliver great returns with modest improvements in the outlook of the business.
At various times in history (think during the rise of the ‘Nifty Fifty’, during the blowing up of the internet bubble, and in the rise of AI related companies), value investing goes out of fashion. The returns from following the crowded trade, or ‘momentum investing’, can often be much stronger, but rarely for very long. Just like the ‘hare and the tortoise’ fable, value (think tortoise) has a very strong habit of coming back.
Three very successful Tideway selected equity funds have all been ‘value-driven’ at heart:
Artemis Global Equity Income (held since Sept 2016 return 258%)
Schroder Global Recovery (held since Jan 2024 return 40%)
RedWheel Global Intrinsic Value (held since Jan 2025 return 45%)
These three funds have done much of the heavy lifting in our equity portfolios in the last few years. Plus, Schroder Global Recovery replaced holdings we had in first Schroder’s UK Equity Income, then Global Income funds – both value-driven funds, which also did well. As Nick will tell you, all three management teams have fantastic track records of compounding investors’ money at more than 10% p.a. and we can see the work that goes into delivering this – it is not just luck!
This week we were comparing the returns from these three funds to what were once extremely popular fund strategies known as ‘quality growth’, epitomised by Terry Smith’s Fundsmith Equity and Nick Train’s Lindsell Train Global Equity. I have added Heriot Global, which we own, and which similarly follows the quality growth strategy.
Source: Morningstar, 15/12/2023-28/04/2026, Daily, Total Return % (GBP)
The ‘quality growth’ story centred on finding companies with steadily improving profits and with high moats to competitors (for example, a strong, longstanding brand) and holding them forever. Nick Train is notorious for the lack of turnover in his portfolio.
We don’t think these fund managers have suddenly become bad, and we are sure they could articulate well their thesis for every stock they own, but they have been a victim of price and value.
Step forward another favourite of mine: Guinness and global brand brewer Diageo, a flagship holding in the Lindsell Train fund. There can only be one pint of Guinness and people will always want it – what could go wrong?
Well, it turns out what can go wrong is the price of Diageo shares. As the cost of money went to zero, Diageo shares went skyward.
Source: Morningstar, 31/05/1988-30/04/2026, Monthly, Price GBP
They have still been a fabulous long-term investment. But, having quadrupled in 12 years from 2010 to 2022 once interest rates started to rise, new investors in Diageo shares have been prepared to pay less and less for Diageo’s profit outlook. From what I can see, Guiness is still a very strong brand!
In reviewing the top ten holdings of our value managers this week, we can see profits have been taken in financial stocks and defence companies, as the managers move away from these companies after big price increases. The managers are spreading out into other unloved sectors such as healthcare and – you guessed it – brewers.
It didn’t surprise us to see Diageo appear on the Redwheel list; the price and overall value is probably right again. Here below are the top ten holdings for all three funds, so you can see what you own.
Common to all three funds is that they are more diversified than the MSCI world index, less US-centric, and all three managers are very active in taking profits and reinvesting where they see value emerge.
I noticed that US Pharma Bristol-Myers Squibb, listed in two funds, rose 3% yesterday on strong earnings.
We think that, while these hard-working fund managers may not always produce the best returns, they should protect capital on the downside and continue to provide good long-term returns. We feel they are more in keeping with our mission statement to avoid permanent big losses when investing irreplaceable capital and beating inflation, than chasing recent momentum or owning the world index.
New Tideway Shareholders
I’m delighted to confirm that as part of our longevity planning, Nick Gait, Ben Klein, and Sam Ratnage have joined the shareholder group in Tideway’s holding company, Invest for Income Ltd, alongside Neil, Marshall, Ursula, and myself.
As senior members of the Tideway team with more than 10 years’ service, they were invited to make a personal investment in the equity of the business. Each has chosen to do so, reflecting their confidence in the future growth and direction of the firm.
Nick, Ben, and Sam’s career development and steadfast commitment, especially through challenging times, has made them integral pillars of our business foundation, and I am excited about the positive impact their involvement will have as we look to the future.
