Performance update

America and Israel’s joint military operation in Iran occurred over the final weekend of February and therefore had no impact on portfolio performance for the month.

February delivered another month of positive returns, building on the strong start to the year. Social Focus portfolios returned between +1.1% for Cautious Growth and +1.2% for Long‑Term Growth. The Social Focus GPS range also performed well, with Cautious Growth up +1.3%, Moderate Growth +1.5%, and Long‑Term Growth +1.7%. On a year-to-date basis Social Focus Core Moderate Growth is +2.6% and Social Focos Moderate Growth GPS is +3.0%

February’s returns were supported by broadly positive equity and fixed income markets, with Global Equity returning +1.5% and Global Aggregate Fixed Income +1.3% in euro terms, despite the equity market volatility linked to AI‑related displacement concerns highlighted by Donough.

Portfolio commentary

Equity markets have generated positive returns so far in 2026, though performance has varied significantly across regions. The United States has lagged other major markets year to date, with the broad index down ‑0.3% and the RI variant up +2.1%. This relative softness reflects its heavy concentration in AI‑linked hyperscalers, which have recently delivered more muted returns following exceptionally strong gains over the past two years. As Donough has noted, this shift also aligns with a growing investor preference for so‑called ‘Heavy Assets / Low Obsolescence’ stocks, which offer more durable cash flows and lower disruption risk.

In contrast, emerging markets have extended the strong momentum seen in 2025, when they returned +14.1% for the broad index and +9.6% for the RI variant. This outperformance has continued into early 2026, supported by favourable macro tailwinds—including falling interest rates and US dollar weakness—alongside attractive valuations, improving earnings dynamics, and sustained investor inflows.

Figure 1: Year to date regional equity market performance

Source: Bloomberg, in euro. YTD: 31-Dec-25 to 28-Feb-26

Our tactical allocations have benefited from recent market dispersion. In particular, our positioning has deliberately tilted the portfolio away from the concentration risk and elevated valuations associated with the Magnificent 7. This has resulted in an underweight to the Magnificent 7 cohort, the United States, and the US dollar. To express these views, we have implemented positions in Hedged Global Equity, Equal Weight S&P 500, European Equities, and Emerging Markets. Figure 2 illustrates the year‑to‑date performance of our tactical equity calls relative to their respective funding sources.

Figure 2: Year to date performance of equity tactical calls

Source: Bloomberg, in euro. YTD: 31-Dec-25 to 28-Feb-26. Performance is shown relative to the funding source of the call, which is global developed market equities in all cases.

*Note 1: Performance of the emerging markets equity call is since inception in January 2026

Two of our active equity managers, SGA Global Growth Equity (-7.8% YTD) and Generation Global Equity (-4.0% YTD), have come under pressure over the past month. The weakness is largely attributable to their exposure to application‑software companies—an exposure that stems from their quality bias, which favours firms delivering contractually recurring, essential services.

However, the launch of ‘plug‑ins’ for Anthropic’s new Claude Cowork agent has prompted the market to reassess the competitive moats of many application‑software providers. Investors are now questioning whether these businesses can maintain the same level of pricing power and profit margins in an environment where AI‑driven automation may compress the value of traditional software workflows.

Both funds are concentrated in nature, 30 – 40 positions, so periods of deviation from broad markets should be expected, in addition their portfolio management teams will be actively assessing the risks posed by potential AI-displacement within the software sector. For example, SGA Global Growth Equity exited positions where they identified fundamental displacement risk (such as Workday, where growth deceleration suggested genuine share loss) while maintaining conviction in platforms where evidence supports continued franchise strength and positioning for AI‑driven growth acceleration.

Within alternative strategies, Ruffer Diversified Return International (+3.9% YTD) has delivered strong performance, extending the positive trend seen through 2025. The strategy has benefited from its defensive tilt, particularly its allocations to short‑dated bonds and gold and precious metals, which have provided resilience amid ongoing market uncertainty.

Portfolio changes

There were no changes to instruments or positioning across our RI solutions during February. If you have any questions regarding current portfolio positioning, please contact your Davy Private Client adviser.