Q3: Coronation Global Equity Select Fund

This commentary is for the retail class of the fund.

MARKET BACKDROP AND PERFORMANCE

Global equity indices set fresh all-time highs in the third quarter of 2026 (Q3) even as the macro backdrop deteriorated on a number of fronts: the Middle East war pushed oil prices back above $100 a barrel, the majority of developed-market central banks raised rates, and government bond yields reached multi-decade highs, with the US 10-year Treasury ending the quarter above 5%. Corporate earnings, however, grew strongly, led by the artificial intelligence (AI) capex beneficiaries. Yet, despite the global equity market (MSCI All Country World Index) returning 17% over the last year, valuations have actually compressed from c. 19x to c. 16x forward earnings.

The narrowness we described last quarter intensified: the equal-weighted S&P 500 declined, and by quarter-end barely 25% of S&P 500 constituents were trading above their 50-day moving average.

Against this backdrop, global equities rose 1.6% in the quarter while the bond index declined 2.5%. The Fund underperformed by c. 1.2% for the quarter, the cost – for now – of holding a diversified portfolio in a market rewarding concentration. We expand on this below.

We estimate the portfolio will generate a five-year IRR approaching 20% and that the stocks are collectively worth c. 90% more than where they trade. Relative to the Fund’s own history, the current degree of undervaluation sits well within the top quartile. Equally important is the composition of the portfolio. It is possible for a portfolio manager to manufacture upside by owning stocks that look extremely cheap (e.g., stocks that trade on very low PE multiples). However, these stocks are often cheap for a reason, with weak or declining competitive positions, no durable competitive advantage, over-leveraged balance sheets, and/or a poor management team. The hit rate of earning good returns from these weak businesses is typically very low. In contrast, our current portfolio is on the opposite end of the spectrum, representing a diversified set of leading businesses across sectors, geographies and business risks. Recently, diversification has diluted returns relative to concentrated indices, and momentum has been a superior strategy to owning undervalued stocks. Over time, we expect diversification will once again prove a strength and undervaluation a driver of returns.

The largest contributor for the quarter was Meta, which investors promoted into the ‘AI winner’ camp following September’s release of its personal AI agent Muse – an example of value emerging at the application layer of the AI stack, an area the market has not been focusing on. Muse illustrates the optionality embedded in our investment case. Early adoption has been exceptional: Muse reached five million US downloads within 22 days of launch – a milestone that took ChatGPT’s app 56 days – albeit helped by Meta’s unmatched distribution.

Life sciences end markets have faced subdued growth since the Covid pandemic, as uncertainty over US policy – pricing, tariffs, onshoring and government funding – has weighed on customer confidence and spending. We have written in previous commentaries that these pressures produced an excessive market reaction to Thermo Fisher’s near-term prospects. The long-term demand drivers remain intact: ageing populations, advances in precision medicine and biologics, and AI’s growing contribution to R&D productivity. Thermo Fisher is the global leader in life sciences tools, and its scale, breadth of offering and disciplined approach to M&A position it to gain share through the cycle. Conditions have now begun to improve: organic revenue growth has been positive for five consecutive quarters, reaching 5% in Q2 of 2026 (total revenue growth of 10.5%), and market sentiment has recovered alongside.

IQVIA is the largest service provider to the biopharmaceutical industry, both the largest clinical trial outsourcing company and the largest provider of data to the life sciences sector. We have owned the business since last year and increased our position in February, when it sold off alongside software companies on fears of AI disruption. The market’s worry was twofold: that IQVIA’s data assets could be replicated, and that AI would make clinical trials so much more efficient that revenues would shrink. We disagreed on both counts. Far from being replicable, IQVIA’s proprietary data places it in a unique position to enable AI adoption across the industry, with regulatory barriers protecting its franchise; and while AI should indeed make trials more efficient, we believe it will also increase their number, as falling costs expand the range of viable drug candidates. Our thesis has begun to play out, and both IQVIA and Thermo Fisher were top contributors this quarter.

Auto1 Group was the largest detractor. The share price continues to experience significant volatility, as the chart below illustrates. Much of this is driven by market participants scraping high-frequency operational data (listings, pricing), which has predictive value for short-term results but little bearing on long-term business value. We remain positive on the business’s long-term fundamentals, as the company continues to build scale advantages that, combined with improving inventory turns, should drive high returns on invested capital.

CATL also detracted, on concerns that auto manufacturers are seeking second battery suppliers. We view this as contingency planning by the manufacturers rather than any loss of competitiveness: CATL remains the industry’s innovation leader. Moreover, the investment case rests on more than electric vehicle demand. CATL’s energy storage systems (ESS) business is growing rapidly, structurally supported by data centre buildouts that require on-site batteries – for backup power or as part of on-site renewable generation.

Our team continues to focus on the fundamentals of each stock we research and own. This involves a comprehensive assessment of both the risks and opportunities AI presents. Given how fast this technology is moving, we regularly reassess these views and re-underwrite our investment cases. In general, we are encouraged by the strong underlying performance of the stocks which comprise our equity portfolio, the quality of the management teams at the helm, and the valuations at which they trade.

Thank you for your support and interest in the Fund.

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