‘It’s hard to find safe assets’ - Jacob de Tusch-Lec of Artemis Global Income | IC Interviews
Jakob de Tusch-Lec, manager of the Artemis Global Income Fund, discusses the fund's three-bucket investment approach (bond proxies, dividend growth, and deep value), explains recent strong performance driven by rotation away from US tech and growth assets, and shares his views on emerging markets, financials, defence, and the scarcity of safe haven assets in the current environment.
Summary
Jakob de Tusch-Lec, manager of the Artemis Global Income Fund (nearly £5bn AUM), opens by clarifying that the fund's reported 2.2% historic yield understates the portfolio's true 3.5–4% yield, which has been compressed by strong unit price appreciation. He explains the fund's founding philosophy: to provide genuinely global diversification across countries, currencies, and dividend-paying stocks, with a macro overlay to give shape to the portfolio rather than relying purely on bottom-up stock picking.
The fund operates via three distinct buckets: (1) classic bond-proxy income stocks such as utilities, pharma, and infrastructure that perform well in weak economies; (2) dividend growth stocks with lower current yields but growing payouts that provide inflation hedging; and (3) a deep value / opportunistic bucket, including emerging market stocks, with higher yields and higher volatility. Valuation discipline is applied most strictly to the bond-proxy and deep value buckets, while the growth bucket allows for paying up for quality.
On recent performance, de Tusch-Lec attributes the fund's strong returns over five years to correctly positioning for a regime change that began with COVID: the shift from low inflation, low rates, QE, and US tech dominance toward higher inflation, higher rates, and a rotation into value, old economy, and non-US assets. The fund was underweight the US, the dollar, and technology — positions that were costly earlier but highly rewarding more recently. He acknowledges nervousness about sustaining this performance, noting that March 2025 has already shown sharp reversals.
On AI, de Tusch-Lec argues the fund cannot easily buy the 'Magnificent Seven' due to low or no dividends and heavy capex spending. Instead, it gains AI exposure through 'picks and shovels' beneficiaries: Siemens Energy (gas turbines for data centre power), Samsung Electronics (memory chips), and Prysmian (copper cabling for electrification). He sees these second and third-order beneficiaries as better suited to an income mandate.
Financials remain the largest sector allocation. European banks, bought cheaply below book value with high cash returns when rates were near zero, have been a major source of returns. However, de Tusch-Lec notes European banks now trade above book and are more vulnerable to stagflationary scenarios, so the fund has been trimming European bank exposure and rotating into emerging market banks as a way to gain economic exposure to high-growth regions like Southeast Asia and Africa.
On defence, the fund holds positions including BAE Systems and Korean defence names. He notes that while secular demand is strong — with multi-year backlogs and government clients unlikely to cancel orders — multiple expansion has largely played out, with some names now trading on PE ratios of 30–50x versus 10x when first purchased. Korean defence stocks are preferred on valuation grounds at roughly half the multiple of European peers.
On the current macro environment, de Tusch-Lec highlights the scarcity of safe haven assets: gold has not acted as a safe haven, government bond yields have been rising, and traditional defensive sectors like food and beverage (Unilever, Nestlé, Diageo) face structural headwinds from white-label competition, over-leveraged balance sheets, and peak margins. He identifies telecoms as an interesting contrarian opportunity — deeply neglected, improving balance sheets, and consolidating from four-player to three-player markets in Europe.
On emerging markets, which represent over a quarter of the portfolio, he argues they offer structurally higher dividend yields, better demographics, lower leverage, and cheaper valuations relative to a US market that now constitutes ~60% of the global benchmark despite representing only 4% of global population. He frames the emerging market overweight as a relative value convergence trade, noting that old-economy sector compositions in EM are better suited to the current environment than US tech-heavy indices.
Finally, on portfolio management process, he describes sell discipline as driven by a combination of factors: better ideas elsewhere, portfolio rebalancing needs, valuation run-ahead, dividend cuts, or rolling over earnings momentum. The fund runs higher turnover than peers, reflecting a constant reassessment of whether holdings can be replaced with superior opportunities.
Key Insights
- De Tusch-Lec argues the fund's reported 2.2% historic yield is misleading because strong unit price appreciation has suppressed it, while the underlying portfolio actually yields 3.5–4% — a structural distinction he considers important for income investors to understand.
- He contends that going truly global requires a macro overlay, arguing that with 7,000 stocks in the universe, pure bottom-up stock picking without a portfolio 'roadmap' inevitably produces something that resembles a style ETF rather than a genuinely differentiated fund.
- De Tusch-Lec claims the fund's outperformance since COVID stems from correctly betting on a regime reversal — being underweight the US, the dollar, and technology at a time when these had dominated for a decade and a half, positioning instead in value, old economy, and non-US assets.
- He argues that the Magnificent Seven are effectively uninvestable for the fund not only because they pay no dividends, but because their massive AI capex spending has driven free cash flows to near zero or negative, making them incompatible with an income mandate regardless of growth prospects.
- De Tusch-Lec asserts that European defence stocks, which the fund first bought on PE ratios of 10x around 2014–2017, now trade at 30–50x and have largely exhausted their multiple expansion story, though he argues backlogs of 5–10x current sales provide earnings de-risking even at elevated valuations.
- He makes the observation that value has outperformed growth everywhere outside the US since 2022, but AI capex has been a uniquely American distortion that masked this global pattern — meaning the global value-over-growth thesis remains intact but is obscured when viewing markets through a US-dominated lens.
- De Tusch-Lec identifies a 'weaponized capital' dynamic where countries are now incentivised to retain domestic capital for defence spending and balance sheet repair, representing a structural break from the previous era when US markets mopped up excess global savings — a shift he expects to persist secularly.
- He argues that telecoms represent one of the few remaining attractively valued defensive sectors, noting that market structure consolidation (four to three players in Europe), improving balance sheets, and years of neglect create a scarcity value at a time when traditional safe havens like gold and government bonds are failing to perform that function.
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