Purchased short-dated UK Gilts. Several high-coupon UK gilts maturing between 2027 and 2030 were purchased to ‘lock in’ yields in line or above the current Bank of England Base Rate of 3.75%. We believe it is increasingly likely that the rapid slowdown in private sector activity will require the Bank of England to cut interest rates further this year to support the economy.
Higher coupon gilts currently offer notably higher yields than equivalent low-coupon issues across a range of maturities. This unusual distortion is the result of significant tax-driven demand for low-coupon bonds from UK taxpayers seeking to benefit from tax-free capital gains from gilts purchased below par and held to maturity.
Sold Amundi 3-7 Year US Treasury ETF. US Treasuries performed strongly in 2025 as tariff-related inflationary fears receded, the US Federal Reserve cut interest rates multiple times and investors moved to ‘price in’ further reductions in 2026. With forward looking yields now much lower and the US economy set to benefit from significant fiscal stimulus in 2026, we felt the risk/reward had deteriorated both in absolute terms and relative to short-dated UK gilts.
Global equities reported mixed results in December. A flat month from the dominant US market offset a strong end to the year in several key regions including the UK, Europe and Asia. Fixed income markets delivered another month of solid positive returns amid supportive central bank policies and benign credit conditions.
International Equities
International Equities were down slightly over the month in sterling terms due to currency effects as the pound strengthened further against the US dollar and a number of other currencies. The importance of diversification was evident as gains from Europe (Waverton European Capital Growth +3.0%, BlackRock European Dynamic +2.7%) Asia (L&G Pacific Index Trust +3.9%) and Emerging Markets (Vanguard Emerging Markets Stock Index Fund +1.5%) offset weakness in the US (SPDR S&P 500 ETF -1.5%), healthcare (L&G Global Healthcare & Pharmaceuticals Index Trust -1.5%) and Japan (Amundi Prime Japan ETF -0.9%).
UK Equities
The funds’ direct UK Equity holdings recorded a modest positive return during the month, lagging the UK market somewhat. The strongest contributors included Rio Tinto (+10.6%), Rentokil Initial (+7.5%), Ashtead (+5.3%), Prudential (+4.7%) and recent additions HSBC (9.7%) and Legal & General (+6.1%). Key detractors were digital media companies Trainline (-6.7%), Auto Trader (-8.2%) and Future (-17.0%), where share prices continue to be weighed down by what we believe to be overstated AI concerns.
Fixed Income
Fixed Income ended the year delivering another month of positive returns with low capital volatility, underpinned by attractive levels of recurring income, supportive monetary policy and benign credit conditions. Positive performance was reassuringly consistent and broad based across both sovereign and credit with no standout performers of note in either direction.
Diversifying Assets
The allocation to listed ‘real assets’ made a notable positive contribution to portfolio returns this month, led by listed infrastructure funds HICL Infrastructure (+2.8%) and International Public Partnerships (+2.2%), and UK real estate investment trust Tritax Big Box (+2.2%). The funds’ investments in absolute return strategies were also additive to returns, with positive outturns from the Brevan Howard Absolute Return Government Bond Fund (+0.7%), Atlantic House Defined Return Fund (+0.7%) and BH Macro (+0.5%), which more than offset a weaker month for the Fulcrum Diversified Core Absolute Return Fund (-0.8%).
Cornelian Risk Managed Funds – Monthly update
In summary
Global equities reported mixed results in December. A flat month from the dominant US market offset a strong end to the year in several key regions including the UK, Europe and Asia. Fixed income markets delivered another month of solid positive returns amid supportive central bank policies and benign credit conditions.
International Equities
International Equities were down slightly over the month in sterling terms due to currency effects as the pound strengthened further against the US dollar and a number of other currencies. The importance of diversification was evident as gains from Europe (Waverton European Capital Growth +3.0%, BlackRock European Dynamic +2.7%) Asia (L&G Pacific Index Trust +3.9%) and Emerging Markets (Vanguard Emerging Markets Stock Index Fund +1.5%) offset weakness in the US (SPDR S&P 500 ETF -1.5%), healthcare (L&G Global Healthcare & Pharmaceuticals Index Trust -1.5%) and Japan (Amundi Prime Japan ETF -0.9%).
UK Equities
The funds’ direct UK Equity holdings recorded a modest positive return during the month, lagging the UK market somewhat. The strongest contributors included Rio Tinto (+10.6%), Rentokil Initial (+7.5%), Ashtead (+5.3%), Prudential (+4.7%) and recent additions HSBC (9.7%) and Legal & General (+6.1%). Key detractors were digital media companies Trainline (-6.7%), Auto Trader (-8.2%) and Future (-17.0%), where share prices continue to be weighed down by what we believe to be overstated AI concerns.
Fixed Income
Fixed Income ended the year delivering another month of positive returns with low capital volatility, underpinned by attractive levels of recurring income, supportive monetary policy and benign credit conditions. Positive performance was reassuringly consistent and broad based across both sovereign and credit with no standout performers of note in either direction.
Diversifying Assets
The allocation to listed ‘real assets’ made a notable positive contribution to portfolio returns this month, led by listed infrastructure funds HICL Infrastructure (+2.8%) and International Public Partnerships (+2.2%), and UK real estate investment trust Tritax Big Box (+2.2%). The funds’ investments in absolute return strategies were also additive to returns, with positive outturns from the Brevan Howard Absolute Return Government Bond Fund (+0.7%), Atlantic House Defined Return Fund (+0.7%) and BH Macro (+0.5%), which more than offset a weaker month for the Fulcrum Diversified Core Absolute Return Fund (-0.8%).
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/resources/insights/cornelian-risk-managed-funds-monthly-update
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