Strategy Performance & Attribution
The MPS strategies delivered positive returns over October, posting gains of between 2% at the lower end of the risk spectrum and 5% at the top. Relative performance was supported by asset allocation positioning and strong security selection across US and UK equities, hedge funds, and property.
At the headline level, returns were predominantly driven by the strategies’ equity exposure, consistent with the month’s prevailing ‘risk-on’ backdrop. However, bond and alternative investment allocations – including the strategies’ exposure to commercial property – also contributed over the month, with returns ranging from 1.7% to 2.2% across the holdings. A weaker pound further boosted gains from global markets for a sterling investor.
Across equity regions, we saw pleasing outperformance from the strategies’ North American allocation. The fund delivered a return of 5.9% led by strength across the AI-orientated semiconductor holdings, most notably Advanced Micro Devices, which enjoyed a stellar month in the wake of its announcement of an enhanced strategic partnership with OpenAI and growth of several other collaborations. Elsewhere, life sciences tools and diagnostics company Thermo Fisher and data centre provider Equinix also performed strongly, with two beat and raise earnings updates bolstering sentiment.
The strategies’ Asian and emerging markets allocation posted returns of almost 6% amid tech sector strength, positive US-China trade developments and optimism regarding the policy playbook of Japan’s new prime minister. Key contributors across the allocation included M&G Japan, Veritas Asian and one of the recent fund additions to the allocation, Heptagon Driehaus Emerging Markets Equity.
The strategies’ UK equity exposure finished ahead of the market – up over 4% – with Next and GSK delivering strong earnings updates. In contrast, the European equity allocation finished marginally behind the market, posting a return of just under 2.50%, with softer earnings from Swiss chemicals specialist Sika and French bank BNP Paribas contrasting with the positive reaction seen to updates from ASML – which as a reminder plays a critical role in the semiconductor industry – luxury goods business LVMH and global healthcare company Sanofi.
Activity
During the month we increased the strategies’ position in Lancashire Holdings, the UK-listed provider of global property insurance and reinsurance products. Despite strong half year numbers in August, the stock continues to screen cheaply, trading on a material discount to the wider European insurance sector. We see scope for attractive upside from the stock, with the company demonstrating a strong commitment to generating shareholder value while enhancing its business model. The trade was funded by reducing the holding in the Vanguard FTSE 250 ETF, with Lancashire itself being a mid-cap constituent of the UK market.
In Europe we initiated a new position in Wolters Kluwer, the Dutch information, services, and software provider. The business focuses on providing solutions that help to improve the productivity and decision making of professionals in various markets. Our purchase of the stock followed a meaningful valuation reset, resulting in an attractive entry point into a high-quality company. Despite concerns around changes in leadership and AI disruption, we see a sizeable margin of safety within the share price, underpinned by strong fundamentals including consistently high growth, high recurring revenue, strong profit markets and low levels of leverage.
Another new name added over the period was Banco Santander, funded by reducing two of the allocation’s existing Bank holdings – Nordea and ING. Banco Santander offers a wide range of financial services across several main divisions, is geographically diversified, and possesses a growing digital consumer bank. We remain constructive on European banks, where we see improving profitability and unstretched valuations that remain discounted to the wider European equity market. Adding Banco Santander – and trimming the two existing, more defensively-orientated holdings – reflects continued conviction in the prospects for this segment of the Financials sector.
Remaining in Europe, we trimmed business management software SAP, adding to our existing position in ASML. Continued weakness in the spirits market in the US and China also prompted a reduction in Pernod Ricard, while the residual position in mobile telecom tower operator Cellnex was sold to fund the Wolters Kluwer position, where we see greater opportunity.
Within the strategies’ emerging markets equity allocation, where we retain an “overweight” allocation, we initiated a new holding in the form of the Robeco Sustainable EM Stars fund, broadening the range of ideas represented. We’ll be delving into the team’s investment approach and the fund’s key characteristics in more detail in the quarter-end review.
And finally, last month we mentioned the sale of the Mygale Event Driven fund, following the unexpected announcement that it would close at the end of September. This was despite a very strong period of performance over the year to date. After engagement with our research team, we have replaced the position with the Cooper Creek Partners North America Long Short Equity fund. Again, further details in the fourth quarter wrap-up.
Outlook
Looking ahead to the closing weeks of 2025, much of what we discussed in last month’s update remains relevant. Despite the US market’s lofty valuations compared to historical standards, we continue to see companies growing their earnings. Recent Q3 reports are evidencing this, with profits on the rise and valuations holding steady, helping to drive stock market returns.
One notable observation since last month is the ongoing US government shutdown, which has now become the longest in history, spanning the entirety of October. This has left us without key macroeconomic indicators such as non-farm payrolls, jobless claims, retail sales, and GDP figures, making it more challenging to assess the wider economic backdrop. For now, we’re focusing on company earnings, which remain robust.
The most profitable businesses globally continue to be the US tech giants. Nvidia, our largest individual holding in the US allocation, made headlines in October by becoming the first company to reach a $5 trillion market cap. We often field questions about whether we’re in a tech bubble, or if valuations are excessive. While there’s undeniable excitement around AI – and some tech names do sport eye-watering valuations – we believe the companies in our portfolio (centred on a ‘growth at a reasonable price’ mindset) have justified valuations, underpinned by strong earnings growth.
The four leading hyperscalers – Microsoft, Amazon, Alphabet (Google), and Meta (Facebook) – posted record revenues and net profits in Q3. Their combined capital expenditure exceeded $100 billion during the quarter, fuelling further growth in computing capacity and future revenues. Nvidia is likely the largest beneficiary of this investment, reinforcing our confidence in its position within our portfolio.
In summary, we maintain a modestly overweight position in both equities and government bonds. While we continue to see plenty of opportunities across stock markets, conventional gilts remain appealing for their yields and potential as diversifiers in the event of an unexpected economic downturn. Equally, we remain optimistic about UK REITs, which offer attractive income and appear undervalued given improving capital values.
Approver: Quilter Cheviot Limited, 6 November 2025
