Performance update

January was a strong month for portfolios. Our active positions benefited from the outperformance of select regional stock markets versus the US, US dollar weakness, and a strong rally in gold (despite a pullback at month end).

Our tactical positions within equities, Europe (+2.4%), Emerging Markets (+6.8%), Latin America (+13.2%), and China A-shares (+2.2%) all outperformed the global benchmark (0%). Fixed income hedged to pounds was very slightly positive (+0.3%) while gold rose sharply (+13.5%) in sterling terms.

Portfolio returns for January ranged between 1.2% for Cautious Growth and 1.7% for Long Term Growth.

2025 Year in Review

Equity markets returned 13.2% in sterling terms supported by earnings growth, lower inflation and the expectation that central banks would continue to bring interest rates down into 2026. Currency played a larger than normal role in how markets performed. The US stock market rose 17.9% in dollar terms, but only 9.7% in sterling terms, lagging other major regions.

Government bond returns were low but positive. The impact of tariffs is yet to show up in the inflation data, allowing the US Federal Reserve to cut interest rates three times in 2025 as concerns grew around the strength of the jobs market. In all major economies, concerns over fiscal policy weighed on longer term bond yields. Corporate bonds fared better as the risk-on sentiment from the equity market extended to credit markets, which performed strongly in 2025.

Figure 1: 2025 Asset Class Returns

Source: Bloomberg & Davy, in GBP as at 31-Dec-25.

We assess the performance of our portfolios through four channels. The strategic asset allocation is the long-term mix of assets that we anchor our decisions to. Tactical asset allocation is how we manage that long term positioning through shorter term risks and opportunities, like President Trump’s ‘Liberation Day’ announcement. The style exposure of a portfolio is the types of assets you own, for example cheap versus high growth stocks. Finally, investment selection is how the investment that we have picked performance against the market we wanted exposure to.

1. Strategic Asset Allocation (SAA)

The SAA was our biggest contributor to returns in 2025. Owning truly diversified asset classes, that move independently of each other proved its value during the market stress seen in April. Alternative assets in particular reduced portfolio volatility and enhanced returns. Gold extended its historical run in 2025, supported by central bank demand and a weaker U.S. dollar, delivering a 53.7% return. Inflation linked bonds also added to performance, as although inflation was lower, expectations for inflation shocks have risen.

2. Style Factor Exposure

2025 was the most challenging year for high quality stocks in two decades. Profitable companies, with stable earnings and lower debt rations lagged the rest of the market due to a rally in sectors sensitive to the economy and the more speculative parts of the market. In our view, these types of rallies can be strong in the short-term, but are unsustainable over the long-term, and at some point, returns should realign with fundamentals.

3. Tactical Asset Allocation (TAA)

We use TAA to avoid risks and take advantage of opportunities that show up in the market and are not captured in our long-term numbers. Throughout 2025, we saw several opportunities to tilt our portfolio. One of the most impactful on returns was our decision to buy more equities during the April, ‘Liberation Day’ sell‑off.

A focus of our tactical strategies was to reduce exposure to the concentrated and relatively more expensive U.S. market. Within U.S. equities, we shifted away from mega caps by employing an equal weight tilt. Outside of the U.S. rather than being defensive and selling equities, we reallocated these funds into Europe, China, and Latin America. caps by employing an equal weight tilt.

In addition, we maintained an underweight to the US dollar through a currency hedged equity position. Taken together, these tactical calls added meaningfully to portfolio returns in 2025.

4. Instrument Selection

Our global active managers are focused on quality characteristics, which we think is the best approach over the longer term but have struggled to keep pace with the market in this more cyclical and speculative environment.

Outside of equities, hedge fund managers added positively to returns in 2025. These strategies are selected for their low sensitivity to the traditional factors that drive stock and bond markets, such as the economy, interest rates and inflation. The performance will not always be positive, but our aim is for it to be differentiated. AQR and Ruffer were standout contributors, returning 18.2% and 11.8% respectively for the full year.

Performance vs ARC

The positive contribution from investment decisions was evident in our returns compared to the industry peer group, the ARC Indices. Portfolios rose in absolute terms and outperformed relative to ARC. Longer term outperformance also remains robust, as shown in Figure 2. Numbers shaded in light blue indicate where we have not only outperformed the ARC Index, but where performance was good enough to place us in the top quartile of managers in the index. The performance of the GPS funds is close to the portfolio returns detailed across risk profiles and time horizons.

Figure 2: Portfolio Performance vs the ARC Indices

Source: Davy & ARC www.suggestus.com as at 31 Dec 2025

Performance is net of all 3rd party fees and an assumed Davy fee of 1% plus VAT, accrued monthly.