Date:

Marketing Communication | Quarterly Commentary

Market Update

Global markets delivered positive returns during the third quarter despite heightened geopolitical tensions, rising bond yields and renewed inflation concerns. Strong corporate earnings, particularly within the technology sector, continued to support equity markets, helping the MSCI ACWI remain firmly in positive territory year-to-date.

The quarter was characterised by volatility linked to tensions in the Middle East, which contributed to higher energy prices and increased inflation concerns. Developed markets, led by the US and Japan, outperformed emerging markets, supported by resilient economic growth and upward revisions to earnings expectations. However, September saw a rotation back towards large-cap technology stocks, while European markets underperformed amid rising energy costs and political uncertainty. Bond markets faced persistent pressure as investors adjusted to expectations that interest rates may remain higher for longer. Government bond yields rose across developed markets, reflecting resilient economic activity, elevated energy prices and concerns over rising public debt levels. Corporate bond spreads also widened from historically low levels, resulting in weaker fixed income returns.

Currency and commodity markets were influenced by central bank policy expectations and interventions to support the Japanese yen. While the US dollar weakened during parts of the quarter, it regained strength towards quarter-end as bond yields moved higher. Gold benefited from periods of dollar weakness before giving back some gains as real yields increased.

Fund Performance & Positioning

In the third quarter of 2026 the Fund delivered an absolute return of -0.76% (compared to the reference index at -0.53%). Consistent with our cautious approach, the Fund had no exposure to subordinated debt which represents around 10% of the reference Index.

At quarter end, the Fund was exposed to 18 countries, compared to the 46 countries of the reference index. The Fund’s largest country overweights were the US (+12.5%), Denmark (+3.8%), and Japan (+3.7%) whereas the most notable underweights were the Netherlands (-11%) and France (-9%). The fund has no exposure to China nor other minor countries represented in the benchmark, such as United Arab Emirates, Croatia, Czech, and Hong Kong, etc..

In terms of duration, the Fund maintained a neutral stance over the period (at quarter end the modified duration stood at 1.9 years vs 1.83 years of the reference market). Our underweighting to the 1-3y bucket (-0.15y) was compensated by an overweighting to the 0-1y (+0.03y) and 3-5y (+0.19y) buckets. The duration profile was overall stable during the period.

From a sector point of view, Financials were at benchmark level (47%). The Fund was marginally underweight Industrials (-5.3%), Consumer, Cyclical and Basic materials (-1% each).

Looking at ratings, we maintained an overweight in the AA (+14.7%) and A (+5.6%) buckets, and a long lasting underweight to the BBB bucket (-20.4%).

In terms of activity, we participated to the primary market in order to enhance diversification, decrease risk, increase yield and/or improved our ESG score. In terms of duration buckets, we shifted exposure from the 0-1y to the 1-3y and we slightly increased the 3-5y. We enter the last quarter of the year with a stronger A average rating (A- for the reference Index), 3.82% yield and 1.9 years duration.

We still avoid aggressive and volatile positioning such as high yield and/or subordinated bonds: we believe good opportunities are provided by the Investment Grade universe while focusing in delivering a cautious approach.

The Fund has always had only Euro denominated issuers, so no Forex exposure. No derivatives have been used. In addition, we remember the Fund is an Article 8+. Green bonds at the end of the quarter stay at 24% vs 15% of the reference index.

Outlook

The US-Iran conflict remained the key macro driver in the third quarter of 2026, contributing to persistent inflation and heightened market uncertainty. Against this backdrop, the European Central Bank (ECB) raised rates twice, taking the deposit rate to 2.50%, as inflation remained above target and euro-area growth proved more resilient than expected. Economic activity strengthened throughout the quarter, with Purchasing Managers' Index (PMI) data reaching multi-year highs, while inflation pressures persisted and fiscal concerns, particularly in France, added to the challenging policy backdrop.

Moreover, Q3 was a negative quarter for EUR investment grade credit in total return terms, as two ECB rate hikes, a global bond sell off and persistent geopolitical uncertainty weighed on the market. The ICE Euro Corporate Index (ER00) delivered a total return of –2.57% for the quarter, with a positive excess return of +0.28% relative to government bonds – confirming that the dominant headwind was the sharp rise in underlying rates rather than credit spread widening, with carry providing a meaningful offset on a government relative basis. By late September, euro corporate bonds were heading for one of their worst Septembers on record, with losses surpassed only during the 2008 financial crisis and the 2022 rate shock. The average yield on global government bonds climbed to a 19 year high during the quarter, with commentators noting that this had effectively wiped out the returns that the euro covered bond market had made earlier in the year.

Looking ahead, the combination of persistent geopolitical risk, elevated and volatile energy prices, and an ECB firmly in tightening mode suggests that volatility in rates and credit markets is likely to remain high. The US Iran conflict continues to pose upside risks to inflation and downside risks to growth, while the euro area economy has so far proved more resilient than expected, complicating the policy trade off.

With money markets pricing the possibility of further ECB hikes and long end yields near multi year highs, we believe that short dated, high quality EUR IG credit remains the most attractive segment within the asset class. The 1-3 year bucket has once again demonstrated its defensive characteristics, offering a compelling carry to duration profile and limiting drawdowns during periods of rate and spread volatility.

In this context, we follow our approach that aims to maximise diversification through a strong and repeatable investment process focused on risk. Our proprietary risk tool identifies a series of small idiosyncratic risks in the investment universe that we want to avoid, while we ensure we are better diversified on the primary risk factors. As such, we continue to avoid subordinated bonds, high yield, regional banks, real estate sector, low liquidity issuers/bonds and countries such as China, Brazil, etc. We acknowledge that these elements are an important missing factor which could enhance performance in a risk‑on environment. However, in line with our investment process, we continue to avoid exposure to them and maintain a genuinely consistent, cautious approach. In addition, as we have consistently highlighted in previous years, geopolitical risk remains a key theme that must be monitored carefully and continuously. In this context, we expect short‑term credit bonds to be less affected by the anticipated volatility. Our investment process continuously scans the market, including the primary market, to enhance diversification and minimise risk. We combine quantitative and qualitative expertise to create genuine synergy, with qualitative analysis ultimately guiding our decisions to deliver the best risk‑adjusted returns for our clients.

Disclaimer

MARKETING COMMUNICATION

This document has been produced by EFG Asset Management (Switzerland) SA is authorised and regulated by the Swiss Financial Market Authority. Registered address: EFG Asset Management (Switzerland) SA , Quai du Seujet 24, 1201 Geneva, Switzerland. Telephone +41 22 918 71 71. 

All sources: EFG Asset Management (UK) Limited ("EFGAM"), Factset, Bloomberg, Morningstar as at end of the month.  Any other sources as applicable.  

This document has been prepared solely for information purposes. The information contained herein constitutes a marketing communication and should not be construed as financial research or analysis, an offer, a public offer, an investment advice, a recommendation or solicitation to buy, sell or subscribe to financial instruments and/or to the provision of a financial service. It is not intended to be a final representation of the terms and conditions of any investment, security, other financial instrument or other product or service. The content of this document is intended only for persons who understand and are capable of assuming all risks involved. Further, this document is not intended to provide any financial, legal, accounting or tax advice and should not be relied upon in this regard. The information in this document does not take into account the specific investment objectives, financial situation or particular needs of the recipient. You should seek your own professional advice (including tax advice) suitable to your particular circumstances prior to making any investment or if you are in doubt as to the information in this document. 

Performance results shown are net of applicable fees and expenses. The value of investments and the income derived from them can fall as well as rise, and you may not get back the amount originally invested. Past performance is no indicator of future performance. Investment products may be subject to investment risks, involving but not limited to, currency exchange and market risks, fluctuations in value, liquidity risk and, where applicable, possible loss of principal invested. Some funds may have high volatility owing to portfolio composition or the portfolio management techniques utilised or be subject to various other risk factors. Such risks are set out in the Prospectus and KIID/KID.

The information provided in this document is not the result of financial research conducted by EFGAM’s research department. Therefore, it does not constitute investment or independent research as defined in EU regulation (such as “MIFID II” or “MIFIR”) nor under the Swiss “Directive on the Independence of Financial Research” issued by the Swiss Banking Association or any other equivalent local rules. Investors should carefully read the Prospectus and the Key Investor Information Document (KIID) and review such documents prior to taking any investment decisions.  This information can be obtained on request and free of charge from your client relationship officer.

A copy of the English version of the prospectus of the Fund and the key investor information document relating to the Fund is available on www.newcapital.com and may also be obtained from EFG Asset Management (UK) Limited. Where required under national rules, the key investor information document/the key information document will also be available in the local language of the relevant EEA Member State. 

Waystone Management Company (IE) Limited is the appointed Management Company and is regulated by the CBI. The Manager is a private limited company incorporated in Ireland under the company registration
number C123529 with its registered office at 4th Floor, 35 Shelbourne Road, Ballsbridge, Dublin, D04 A4E0, Ireland.

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Comparisons to indexes or benchmarks in this material are being provided for illustrative purposes only and have limitations because indexes and benchmarks have material characteristics that may differ from the particular investment strategies that are being pursued by EFG and securities in which it invests. 

The information and views expressed herein at the time of writing are subject to change at any time without notice and there is no obligation to update or remove outdated information.
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Information for investors in Australia:
For Professional, Institutional and Wholesale Investors Only. This document has been prepared and issued by EFG Asset Management (UK) Limited, a private limited company with registered number 07389736 and with its registered office address at Park House, Park Street, London W1K 6AP (telephone number +44 (0)20 7491 9111). EFG Asset Management (UK) Limited is regulated and authorized by the Financial Conduct Authority No. 536771.
EFG Asset Management (UK) Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the United Kingdom (FCA Registration No. 536771) under the laws of the United Kingdom which differ from Australian laws. This document is personal and intended solely for the use of the person to whom it is given or sent and may not be reproduced, in whole or in part, to any other person.
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IMPORTANT NOTE: FOR PUBLICATIONS WITH CONTENT RELATED TO FUNDS
Offering Documents
Neither this document nor any document under which Interests in the New Capital Fund Lux (the “Fund”) are offered is a prospectus, product disclosure statement or other formal disclosure document under the Corporations Act.  Interests in the Fund may not be offered, issued, sold or distributed in Australia other than by way of or pursuant to an offer or invitation that does not need disclosure to investors either under Part 7.9 or Part 6D.2 of the Corporations Act, whether by reason of the investor being a wholesale client (as defined in section 761G of the Corporations Act and applicable regulations) or otherwise. Nothing in this document nor any document under which interests in the Fund are offered constitutes an offer of interests in a financial product or financial product advice to a 'retail client' (as defined in section 761G of the Corporations Act and applicable regulations).
The issuer of the interests in the Fund relies on exemptions available under Australian law from the need to hold an AFSL for the provision of financial services to Australian wholesale clients. Note that as all investors must be wholesale clients, no cooling off rights are available in relation to an investment in the Fund.
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