Strategy Performance
MPS strategy returns were also positive for the month, typically rising between 0.5% and 1.25% in January (all returns total and in sterling, unless otherwise stated). The period was notable for the divergence in returns seen across equity markets, particularly for a sterling investor, with North American equities down 0.75% (as the dollar fell over 1% against the pound), European equities up 2% and emerging markets up over 6%. The UK market also finished in positive territory, returning over 3%.
Sterling bonds had a relatively sedate start to the year, with yields on 10-year gilts finishing at similar levels to where they ended 2025. This reflects, in part, where we are in the global interest rate cycle: towards the end of 2025, several central banks indicated a pause in cuts, pointing to future rises to tackle inflation. Indeed, despite cutting interest rates by 0.25% to 3.75% at its December 2025 meeting, the Bank of England (BoE) pointed out that with inflation showing signs of coming down, future rate decisions would be a “closer call”. Gilts finished the month down -0.2%, while investment grade corporate bonds were up 0.3%.
Activity
January was a busy month for activity, both at the headline asset allocation and underlying security selection levels. Starting with the former, we selectively reduced the strategies’ UK equity exposure, trimmed European equity holdings, and took profits on Asian equity and emerging markets allocations following recent strength. We used the proceeds from these moves to selectively add to the strategies’ North American equity exposure, shifting allocations to a broadly “neutral” weighting while adding to preferred underlying holdings amid January’s earnings season updates.
From a stock perspective, we added a new position in Glencore, increasing the UK weighting to the Materials sector in the process. This move followed the announcement that merger talks had restarted (and subsequently been abandoned) between Glencore and Rio Tinto: the latter an existing holding that we trimmed to help make room for this addition. As covered last month, we have become more positive in recent months on the outlook for the UK-listed miners, with Glencore an attractive addition to the long-standing holding in Rio, and a larger active position in Anglo American.
Staying in the UK, we took profits on the strategies’ holding in M&G, following a strong total return since its addition last year, and added the proceeds to HSBC. This move further bolstered the headline exposure to UK banks. We also exited the holding in Whitbread, reflecting the weak outlook for consumer discretionary in the UK, and trimmed the position in British Land, modestly dialling back our conviction in this sector.
In Europe, we added to the position in Banco Santander, where we continue to see an attractive mix of exposure to growing economies and favourable earnings growth. We funded this increase by exiting the residual position in office real estate business Gecina: a good business, but an exposure that we’d rather deploy elsewhere. We also trimmed Consumer Staples giant Nestlé to initiate a position in Jerónimo Martins: the Portuguese listed discount supermarket chain with a considerable proportion of its operations in Poland. Despite margin pressure from a price war with Lidl, the majority of which we believe has now played out, Jerónimo has successfully maintained its leadership position, and we see the business as well placed to capture rising demand in an improving Polish economy and refocus on profitability enhancements.
Finally, we adjusted the strategies’ US Industrials exposure, exiting the remaining exposure to equipment specialist United Rentals in favour of adding to the existing holding in Honeywell International. United Rentals remains a quality business and has been a holding – and pleasing investment – since the inception of the fund in 2021. However, with margins missing again in their latest update, and fleet productivity deteriorating, we see little room for error in the valuation of a stock that has historically sharply derated when non-residential construction activity has been soft. In contrast, the ongoing reduction in the complexity of Honeywell’s business, strong order backlog, and a relatively undemanding valuation, should all prove positive catalysts for the share price in 2026.
