Coronation Global Managed Fund

Following a strong three-year period for global equities from 2023 to 2025, the market backdrop in the first quarter of 2026 (Q1-26) has been challenging. Whilst global equity markets are down "only" 3% in USD over the quarter (as measured by the MSCI All Country World Index), there has been significant dispersion and volatility below the surface, with many shares down heavily. In fact, every one of the Magnificent 7 group of technology companies underperformed in the past quarter (Q1-26), with bellwether Microsoft down over 20%. The global bond index (Bloomberg Global Aggregate Bond Index) was more muted, though it still declined by 1% in the quarter.

Ongoing developments in artificial intelligence (AI) and shifting narratives around its potential impact on a broad range of businesses were the key drivers of equity volatility. In addition, the escalation of conflict in the Middle East sent oil prices up sharply. This resulted in increased inflation expectations, shifting the expected glide path for key policy rates globally. Materials and energy outperformed other sectors, as did consumer staples, as investors sought short-term safety. The Fund has little to no exposure to these sectors. In our view, many companies in these sectors face structural challenges and may struggle to deliver meaningful, real earnings growth over longer time periods.

The Fund declined by 12.0% in the first quarter of 2026. While short-term drawdowns are never welcome, we recognise that some volatility is an inevitable feature of the Fund's asset allocation, and perhaps even more so following a period of strong absolute and relative outperformance. Ultimately, we view this as a necessary price to pay for generating attractive long-term returns. We are genuinely encouraged by the opportunity set presented by this dynamic market backdrop.

In last quarter's commentary, we highlighted three risks that explained why our equity exposure was not higher:

1. Geopolitical rivalry and the unpredictability of escalation paths
2. Unsustainable fiscal trajectories
3. Aggregate equity market valuation, with elevated multiples compared to history

We also highlighted the portfolio's ample liquidity position "to add to existing and new ideas should they become even more attractively valued". As risk no.1 triggered a sell-off in a number of stocks, we followed our discipline and used this liquidity to increase our equity exposure at lower prices, thereby improving the future return potential of the portfolio.

At quarter-end, the portfolio was positioned as follows:

• 70% effective equity (5% higher than Q4-25)
• 9% in real assets (listed infrastructure and property)
• 3% in high-yield fixed income
• 6% in inflation-linked assets
• 11% in investment-grade fixed income instruments
• 1% in short-dated T-bills (5% lower than Q4-25)

With AI advancements dominating daily news flow, many strong businesses – including digital platforms, ecommerce companies, data owners, online brokers, and online travel agents – have been unfairly lumped into the 'AI loser' bucket. This shift was supercharged in Q1-26, with the market quickly and indiscriminately selling off most names in these sectors, preferring to shoot first and ask questions later. AI clearly has the potential to disrupt many business models, and there is a continuum of potential risk. Whilst remaining humble in our views, we believe there are compelling arguments that select companies in these segments are either resilient to AI disruption or will prove to be significant beneficiaries of the technology in time. In our view, the market is significantly overstating the potential risks whilst ignoring the potential benefits for these companies. We discuss some stock-specific examples below:

• Spotify (down 16% YTD in USD) declined as the market questioned the value of human-generated music and audio content amid the emergence of new AI-driven music creation tools. We believe the appetite for human-generated content will endure, and that a minority shift towards AI-generated music will ultimately benefit Spotify as the world's largest audio distribution platform.
• Ecommerce companies declined partly due to AI disintermediation fears, with Amazon and the emerging market duo of Coupang and Sea Limited all down heavily. In an unlikely future where all customer orders originate via AI platforms like ChatGPT, the strong physical moats that allow these companies to fulfil orders at the lowest cost and in the shortest time should become increasingly important, leading to outsized market share gains.
• Data owners like London Stock Exchange Group and S&P Global declined by over 20% in the first few weeks of the year, as the value of their proprietary data was questioned. We believe that only small parts of these businesses are at potential risk from AI disruption, and that these remain two of the highest-quality companies in the world.
• Online brokers like LPL Financial and Charles Schwab sold off by over 15% as the wealth platform Altruist launched an AI-powered tax planning tool in the US. In our view, the human connection in wealth management remains essential. We expect advisors and platforms like Schwab to leverage AI to meaningfully enhance efficiency and client outcomes – turning the technology into a competitive advantage rather than a threat.
• Online travel companies like Booking Holdings and MakeMyTrip in India declined on the back of fears that consumers would shift their travel bookings directly to AI platforms like ChatGPT. This view overlooks the physical infrastructure advantages – including world-class customer service and deep integration with thousands of small hotels – that companies like Booking have built up over many years.

Auto1 Group, Europe's largest online vehicle sales platform, was the largest detractor from performance in Q1-26, with its shares falling on the back of a combination of market concerns, all of which we believe are significantly overstated. Firstly, the market is concerned that accelerated autonomous vehicle (AV) adoption will harm used car demand in Europe. Second, Amazon Autos entered the UK with plans to expand into continental Europe. Finally, there are concerns about potential market-wide disruptions from rapidly rising levels of new and affordable Chinese vehicle imports into Europe.

These concerns, in our view, underestimate Auto1's growth potential and strong economic moat. While Auto1 is the leading platform for used car sales in Europe, its retail market share is still minuscule at under 1% of used cars sold. The company has a multi-year growth runway irrespective of potential shifts in demand driven by AV adoption. Furthermore, Amazon is entering the market with an asset-light marketplace model. This strategy cannot address the operationally intensive nature of sourcing, transporting, refurbishing, storing, and delivering used cars at scale. Finally, our research suggests that despite rising levels of new Chinese vehicle imports into the EU, used car market volumes remain resilient, with used car pricing remaining broadly stable. Auto1 is very early in its growth journey; Carvana in the US has demonstrated what can be achieved at scale in online used-car retail, and we believe the company is on its way to replicating this across Europe. Auto1 remains a high-conviction holding, and we took advantage of the share price weakness to add materially to our holding.

The investment backdrop remains dynamic, shaped in no small part by rapidly evolving AI narratives. In our view, many winning businesses have been sold indiscriminately without due consideration for how they use this technology to improve their products and services dramatically. History has shown repeatedly that when the market paints with too broad a brush, it creates compelling alpha opportunities for long-term, valuation-focused investors. In recent years, we capitalised on similar dislocations during Covid (2020), the rate-hike-driven long-duration sell-off (2022), and the Tariff Tantrum (2025) to add value to client portfolios.

Some businesses will embrace AI to win, while others will fall behind – and we expect the gap to widen. The equity portion of the portfolio, we believe, is an attractive collection of businesses firmly in the winner's camp: competitively advantaged, with strong growth prospects and compelling valuations. The remainder is invested primarily in liquid investment-grade bonds, with a further 6% allocation to US inflation-linked bonds which, at c. 2% real yields, represent good value.

Thank you for your support and interest in the Fund.

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