Fund information

Numerous surveys attest to how Donald Trump’s destructive and chaotic trade policy has done immediate damage to consumer and corporate confidence. However, the suspended full implementation of Mr Trump’s tariffs and robust employment trends create a twilight zone with no meaningful contraction in economic activity. This resilience is evident in the quarterly results recently reported by the portfolio’s companies. Overall, the message from them is one of stability, best seen, for instance, in spending data provided by card networks Mastercard and Visa. Payment volume trends in April show broad-based consistency across geographies and categories. Where pockets of softness have emerged, they are relatively isolated – in U.S. inbound and mass-market U.S. domestic travel, for example. Chinese consumption also remains weak.

For their part, investors are in no mood to look kindly on any sign of deterioration. Despite exceeding earnings expectations for the quarter and reaffirming the outlook for the rest of the year, Fiserv shares fell over -18% after reporting lower than expected volume growth for Clover, its payment terminal and software service for small businesses. We see this as a severe overreaction and one that overlooks Fiserv’s diverse momentum across its fintech services, Fiserv’s improving financial productivity, and the company’s long track record for delivering on its commitments.

Investors’ sensitivities are creating opportunities within the portfolio. During the extreme volatility experienced at the start of April, valuation discrepancies widened sufficiently to motivate a reallocation of capital. In general, this favoured U.S. software and internet companies whose valuations had fallen to historically low levels, at the expense of predominantly European companies whose shares had outperformed and re-rated. We also added to Fiserv after its share-price decline. These actions, and the valuation opportunities they exploit, combine with the enormous underlying strength of the Fund’s companies. We have high confidence in their long-term trajectory in what remains a deeply uncertain time for the global economy.