Tideway’s investment committee sat this week to take stock at end of the 3rd quarter and agree actions for the rest of the year.
In stark contrast to the short attention span social media trend, TS Lombard sent in a 91 page report and Tideway’s investment team almost matched them in submitting 74 pages!
We will be covering these reports in more detail in our Autumn Investment Webinar on Thursday evening next week (register here) and in your quarterly performance reports which will be posted into the app in your account in the next couple of weeks.
The Big Picture
Here below is a summary of our firm wide client investments and the approximate average returns earned this year to the end of September:
Source: Tideway 30 September 2025
These are before our fees and of course each client’s returns will depend on how they are allocated across the various assets. You’ll be able to view your detailed portfolio valuation on the portal within the next two weeks.
For context the iShares UK Gilt index ETF is up 2% for the year, and the iShares Core Corporate bond ETF is down roughly 3%. The MSCI ACWI Equity index is up around 11% in sterling, the Vanguard Lifestyle 40% equity fund is up around 7%.
Nick will provide more detail in the webinar and in his quarterly report on how we have delivered these returns but a theme from TS Lombard was the hint that foreign investors in the US, and US institutional investors are reappraising their heavy overweight US positions and spreading out to the rest of the world. This could explain the weaker dollar, higher US bond yields and the relative performance of US equities to the rest of the world in 2025.
Looking more closely at the MSCI world index it is clear to see that in 2025 the US equity market is the laggard not the leader and is dragging the index return down. Tideway’s equity positions have taken advantage of this shift.
MSCI ACWI Index Country Contributions to Returns 2025 YTD
Source: Tideway – 30 Sept 2025, Total Return in GBP
What Could Possibly Go Wrong?
When things are going well it is always good to think about what might derail the current favourable return picture. Here below are three issues we discussed:
Geopolitical Risk
These are in plain view and our Russian specialist Stephen O’ Sullivan writes about recent developments HERE. It’s a good read and the description of NATO using million $ missiles to shoot down $10,000 drones highlights an issue that was also reported in the FT recently by German defence company Rheinmetall’s CEO Armin Papperger calling for lower cost defence systems.
TS Lombard’s pack included this chart looking at how Trumps actions around Nato and the Russian threat are galvanizing German Government spending:
Government Debt and Finances
Longer duration bond yields are still trending higher and, in many countries, tough decisions are going to need to be taken around spending and taxation that politicians, so far, are shying away from.
This chart caught my eye in the Tideway deck courtesy of the Artemis fixed income team looking at how Governments, particularly in the US and UK, are getting stretched, whilst households and companies in the same countries are relatively deleveraged and in good shape.
Inflation
It seems everyone is worrying about inflation potentially caused by Trump’s tariffs (something that has yet to really emerge), deportations gathering pace, taking low-cost workers out of the economy, and of course inflation would be an obvious way for Governments to reduce their debt burdens in real terms.
Step forward TS Lombard’s pyramid of doom highlighting inflation thresholds that may create economic instability. 4.5% p.a. is postulated as the point where the tin hats come out, we are not there yet!
These are just three issues to highlight. There are always risks out there which we should not be complacent about, even though many retail equity investors seem blind to them. Other scenarios we considered were:
- A possible AI capital spending bubble,
- the propensity for US consumers to stop spending in any significant equity market downturn (given the extent of their exposure to US equities) causing a US recession,
- and the risks of corporate credit spreads widening in fixed income markets
If there is something keeping you up at night and would like our views on it, do email me at james.baxter@tidewayinvestment.co.uk and we will endeavour to give answers at next week’s webinar.
Where There is Risk There Is Opportunity
The Tideway teams deck contained a revealing table of all our main equity funds showing the underlying holdings and their returns so far in 2025. Of the Mag 7 only Nvidia is really living up to its reputation in 2025 with a c.31% return in sterling, there are solid gains from Meta (+16%), Google (+21%) and Microsoft (+14%), but Amazon, Tesla and Apple are flat to down in sterling.
By contrast I came up with Tideway’s magnificent 11 companies whose values have more than doubled in 2025 so far driving returns in some of our top performing equity funds. Non-disclosure agreements prevent me from naming all of them, most managers don’t like us telegraphing all their holdings, but I can name a few and the correlation with the fears expressed above are stark.
Defence spending is driving returns in this area of technology, the aforementioned Rheinmetall AG is up a staggering 220%. Rheinmetall has historically had revenues of cEur10bn p.a. but now has a Eur60bn backlog of orders and is set to quadruple its revenues and profits in the next 5 years. Hanwha Aerospace in South Korea and Japan’s Mitsubishi Heavy Industries are in Tideway’s Mag 11, British Aerospace just outside but still up a whopping 80% year to date.
When inflation is a threat, investors like to buy gold, and whilst we are not speculating on the price of the metal, we do have spectacular returns from the associated picks and shovels. Gold miner Newmont Corp has more than doubled and is the best known miner held, but we were all quite surprised how many commodity stocks, which have been dull for many years, were now hitting the top of the table, several more than doubling in value this year.
Siemens Energy AG in Germany has doubled in value thanks to the rush for energy supplies to data centres, a good example of following the AI supply chain.
Finally, higher interest rates and bond yields are not only bolstering our fixed income returns but are transforming the P&Ls of financial businesses making them much more profitable, lower risk for bond investing but also equity returns are stellar from a sector of the market which had been completely unloved for years. Societe Generale in France, Piraeus Financial in Greece and a large Dutch Bank are all in our Mag 11.
It seems just as in the Ryder Cup, and despite the hoopla, Americans may not be holding all the cards when it comes to investing in 2025.
Actions For the Rest of 2025
We are not sitting on our laurels and the committee approved changes that will likely be carried out through the rest of the year to improve risk adjusted return outlook and further lower costs from our third-party managers.
We don’t like to telegraph these before we complete them, so we will keep the detail for future updates.
