Performance update

The Social Focus range delivered another positive month in May, with Social Focus Core Portfolio returns ranging from +1.7% for Cautious Growth to +3.9% for Long-Term Growth. A similar pattern was observed across the Social Focus GPS Funds, with returns of +1.7% (Cautious Growth), +2.8% (Moderate Growth), and +3.9% (Long-Term Growth).

Performance was primarily driven by strong equity markets, with Global Equities rising +5.6% (RI Global Equity +4.5%). Regionally, Developed Markets gained +5.1%, supported by robust U.S. equity performance (+5.7%), while Emerging Markets outperformed at +10.2% (RI Emerging Market Equity +4.3%).

At the sector level, technology stocks, particularly those linked to artificial intelligence (AI) and semiconductor production, were standout performers. The technology sector grew by +16% in the US and an impressive +29% in Emerging Markets (all figures in euro).

Meanwhile, improving prospects for a cessation of hostilities in the Middle East contributed to a decline in crude oil prices. This easing in energy prices helped reduce pressure on bond yields, with Global Aggregate Fixed Income rising +0.5% during the month. The combination of strong global equity performance alongside positive fixed income returns proved particularly favourable for multi-asset investors in May.

On a year-to-date basis, Global Aggregate Fixed Income remains broadly flat, while Global Equities are up approximately +13%. Investor sentiment continues to be underpinned by strong fundamentals, with US companies delivering their strongest earnings quarter since Q4 2021—albeit with performance largely driven by the ‘Magnificent 7’1.

Year-to-date, Social Focus Core Portfolio returns remain firmly positive at +2.1% (Cautious Growth), +4.1% (Moderate Growth), and +5.9% (Long-Term Growth). The Social Focus GPS Funds have delivered similarly strong results, with returns of +2.7% (Cautious Growth), +4.9% (Moderate Growth), and +7.2% (Long-Term Growth). Both ranges are showing a robust recovery from the lows experienced at the end of Q1.

Portfolio commentary

Active management faced a challenging environment in May, driven by the narrow leadership within equity markets and limited returns outside the technology sector. This concentration meant that many diversified active strategies, particularly those with less exposure to high-performing technology stocks, struggled to keep pace with broader market indices.

Tactical decisions to tilt exposures away from the US mega-caps while favouring Europe equities (+3.5%), and the S&P 500 equal weight index (+4.1%), also detracted from performance.

Liquid diversifying strategies delivered strong returns, supported by gains from JP Morgan Global Macro Opportunities (+2.5%) and Nordea Alpha 10 (+5.5%). All figures are in euro terms.

Our preferred exposure to the AI theme is through emerging markets and allocations to hardware manufacturing companies within the index, a tactical positioning that has performed well. However, other positioning away from the highly concentrated US market, as noted above, has lagged since the onset of the Iran conflict. Our active managers continue to apply a disciplined valuation approach, and the portfolio’s blend of managers provides broad-based exposure across sectors and complementary investment styles. This diversification helps reduce reliance on any single market driver or dominant theme.

Economic risks remain elevated across several key variables, including inflation dynamics, geopolitical tensions in Iran, the uneven resilience of the US consumer, and the ability of AI-related companies to effectively monetise their capital expenditure. The rapid shifts in market leadership during March and April, alongside the recent concentration of returns, have reinforced the importance of maintaining diversification both within and across asset classes

Strong recent market gains often lead investors to expect similar returns to persist—a behavioural tendency known as recency bias. While this reaction is natural, it can result in overly optimistic expectations and increased risk-taking at market peaks. Historical evidence, however, suggests that such periods of strong performance are often followed by more subdued returns. By examining longer-term market data, investors can gain a more balanced perspective, recognising that markets move in cycles and that average returns tend to normalise over time. This broader view supports a more cautious and disciplined approach to setting future expectations.

Figure 1 shows the annualised 3 year rolling returns of global equity and global bond indices since the beginning of the century. While not at the levels of the early 2000s, bond returns have recovered recovered from the inflation shock of 2022 and are back in positive territory.

Equity returns have naturally been much more volatile, but generally positive. The current three-year annualised equity return of 19% (as of May 2026) is in line with previous peaks seen after major market recoveries, including the periods following the dot-com bust, the global financial crisis, the mid 2010s era of ZIRP2 and quantitative easing, and the post-covid bull market in technology and growth stocks. Viewed in this context, it would be prudent to expect returns to moderate rather than continuing at the recent pace.

In terms of Social Focus solutions, the Core portfolios have also delivered strong three-year annualised returns to May 2026—+6.0% for Cautious Growth, +8.1% for Moderate Growth, and +10.4% for Long Term Growth. Similarly, GPS funds have returned +5.7% for Cautious Growth, +7.9% for Moderate Growth, and +10.4% for Long Term Growth over the same period.

While these outcomes are encouraging, they are above typical long-term return expectations and should be viewed in context. History suggests that periods of stronger-than-average performance are often followed by more moderate returns, as markets revert toward more normalised levels over time.

Figure 1: Annualised 3 year returns of global equities and global bonds

Source: Bloomberg as at 31/05/2026, in euro, using monthly data