US-Iran Latest
As the ceasefire between the US and Iran enters its second week, optimism around renewed peace talks and the potential for a positive outcome, has helped drive a strong recovery in equity markets from their post-war lows. Once again, this has proved painful for those inclined to trade headlines and sell into initial weakness, highlighting just how difficult and unreliable market timing can be:
As Terry Smith, one of the UK’s most well-known investors, has said:
‘There are only two types of investors – those who know they can’t make money from market timing, and those who don’t know they can’t.’
For the record, we, and our managers, firmly sit in the former camp.
While we cannot predict the future, markets appear to be pricing in a relatively optimistic scenario: that a second round of talks will succeed, the ceasefire will become permanent, and any impact on growth and inflation will be contained.
Furthermore, TS Lombard’s base case remains unchanged from their note of 18 March:
‘In our view, the scales will be tipped by the economic cost of failing to take up the available face-saving compromises. For the Iranian regime that cost would be existential since survival also depends on oil rents, while for the US – with RoW in tow – the stakes, in the form of global recession, are scarcely less high. We stick to our view (set out on 18 March) that this crisis will be resolved by the end of May at the latest.’
As TS Lombard highlights, this is only a base case. A range of outcomes – both positive and negative – remains possible from here. While we naturally hope for the more favourable scenarios, we cannot predict either the path ahead or the market’s reaction, particularly over shorter timeframes. As a result, we continue to position portfolios for a range of outcomes, maintaining exposure to defensive assets alongside selected higher-risk (in volatility terms) holdings.
We have made an adjustment within one of the more defensive areas of the portfolio, which we outline below.
Portfolio Change
Sell Sanlam International Credit and purchase of Ninety-One Global Total Return Credit
What is staying the same:
- Despite the change in investment manager name, both strategies are run by the same investment manager following Ninety-One’s acquisition of Sanlam’s UK fund business (announced in November 2024 and completed in June 2025).
- Justin Jewell has co-managed Sanlam International Credit since the acquisition and is co-portfolio manager on Ninety-One Global Total Return Credit with Darpan Harar.
- Fees: while the Ninety-One Global Total Return Credit typically has an ongoing cost figure of c.80bp (reflecting its broader and more active opportunity set – see below), Ninety-One has honoured Tideway’s existing fee agreement of 38bp.
- Core philosophy unchanged: The strategy continues to focus on lending to corporates rather than governments, with an emphasis on shorter time horizons. This approach aims to protect capital and to deliver stable returns above inflation. Detailed fundamental analysis of individual companies remains central to the investment process.
- Real yields: in a world of geopolitical uncertainty where inflation remains a risk, we believe we are being paid an attractive real yield for taking credit risk. Both strategies have yields above inflation, of c.6% nominal.
What is changing:
- Broader and more flexible opportunity set: Global Total Return Credit brings with it an expanded toolkit across traditional and specialist credit, including global investment grade, high yield, structured credit, bank capital and hybrids.
- This supports an active ‘sell expensive / buy cheap’ approach, enables meaningful allocation to attractive areas such as structured credit. Put more simply the manager has many additional places to hide in riskier/ more expensive markets.
- The fund also takes a more global approach than its predecessor.
- Scale: The fund currently has c.£800m of Assets Under Management (AUM) and a broader credit team overseeing c.£4bn across related strategies. Tideway clients will now make up less than 5% of the fund. Prior to the switch, the Sanlam strategy had a total AUM of £45m.
Summary:
- Markets pricing in positive geopolitical scenarios – Tideway not being complacent.
- Portfolio change: Switch of fund. Same headline asset class with similar yields run by the same investment manager and same portfolio manager.
- Additional diversification: compared with more ‘vanilla’ credit strategies, the broader mix of exposures aims to deliver a smoother return profile than traditional investment grade or high yield alone.
Should you have any questions regarding the contents of this communication then please do not hesitate to get in contact with your wealth manager.
