Monday Club – 05/10/26: Your weekly Wealthwise digest

Investment round-up

Liontrust buys Hawksmoor businesses

Liontrust Asset Management has agreed to buy Hawksmoor Investment Management’s fund management and model portfolio services arms for an initial £6m. The proposed acquisition, for the business of Hawksmoor Fund Management and Hawksmoor Investment Services, would see Liontrust pay two contingent payments of up to £2m each in cash, subject to ongoing revenues, 12 and 24 months after completion.

Nuveen Schroders deal completes

US asset manager Nuveen completed its acquisition of British fund manager Schroders last week, creating a combined business with more than $2.6tn (£1.97tn) in assets under management and a presence across more than 40 markets. Schroders will continue to operate separately ⁠within Nuveen for the next 12 to 18 months, led ⁠by group chief executive Richard Oldfield.

Fidelity launches enhanced yield active ETF range

Fidelity International has launched an Equity Enhanced Yield range, combining fundamental research with a systematic options overlay. The rollout kicks off with the introduction of the group’s Global Equity Enhanced Yield and US Equity Enhanced Yield UCITS ETFs, which list on the London Stock Exchange on 5 October.

Janus Henderson buys Rantum Capital

Janus Henderson is to acquire Rantum Capital, a Frankfurt-based private markets investment manager. Founded in 2013, Rantum focuses on providing private debt and private equity financing solutions to family and entrepreneur-owned small and mid-sized companies in Germany, Austria and Switzerland.

IA data highlights August inflows

Net retail sales hit £894m in August, marking the 10th consecutive month of retail inflows, according to the Investment Association (IA). Sterling Strategic Bond was the best-selling IA sector in August, with sales of £367m, as UK retail investors continue to show a preference for fixed income. For equity funds, they favoured global diversification in August over investing in UK or US equities.

Improving sentiment for UK equities – Berenberg

The number of global fund managers looking to allocate to UK equities has risen in the last six months, according to the latest Berenberg Investor Barometer. Of the 300 managers polled, 34% were planning to increase their UK equity exposure in the next 12 months, compared with just 10% planning to reduce it.

Capital Group launches four active ETFs

Capital Group has received the green light from the Central Bank of Ireland to launch its first active ETFs in Europe. The initial four strategies will be a Global Growth Equity ETF, US Core Equity ETF, US Dividend Value ETF and a Global Bond Plus ETF.

FTSE Russell creates thematic indices

FTSE Russell has launched a series of thematic stockmarket indices that classify companies through AI-enabled analysis of news, transcripts and data. The FTSE MarketPsych Thematic Index Series uses a thematic classification database, which analyses London Stock Exchange Group’s datasets for context, meaning and relevance.

Global equities launch from Franklin Templeton/Putnam

Franklin Templeton has launched a global equity fund from Putnam Investments. The FTGF Putnam Global Research fund is a sub-fund of the Ireland-domiciled Franklin Templeton Global Funds (FTGF) range and follows the launch of Putnam’s flagship US equity strategies for UK and European investors last year. The main initial share class being offered in the UK carries a fee of 0.33%.

Schroders launches pair of active bond ETFs

Schroders has launched a pair of actively managed fixed income ETFs – the CoCo Financial Credit Active and USD Investment Grade Corporate Bond Active UCITS ETFs. The former will invest at least two-thirds of its assets in contingent convertible (CoCo) bonds denominated in US dollars, euros or sterling, and issued by global financial institutions.

AJ Bell and Standard Life launch offshore bond

AJ Bell Investcentre has launched an offshore bond in partnership with Standard Life. The Standard Life International Bond will be available to advisers using AJ Bell Investcentre, via a General Investment Account.

In focus: Debt toll

Notwithstanding some short-term easing of recent tensions, most of the world’s major debt markets remain on thin ice – and yet their equity counterparts continue to skate along, apparently unbothered. Such a chilled stance in the face of the problems in bond-land is perhaps surprising – after all, high borrowing costs will affect economic growth and companies’ ability to grow and invest, as well as the value of their cashflows.

Since the end of August, the US 10-year treasury yield has moved from 4.6% to 5.3% and attempts by US treasury secretary Scott Bessent to buy back longer-dated debt have had little impact in the absence of a change in fundamentals.

As long as the bond vigilantes look at the US and see high inflation, stronger growth and wayward fiscal policy, they are unlikely to shift their stance. An end to the war in Iran could make a difference but that looks a remote possibility for the time being.

And yet, over the past month, the benchmark S&P 500 index has maintained its level and AI-related stocks have continued to make progress. For its part, the CNBC Mag 7 index is up 3% over September as investors continue to support the AI trade.

This suggests a surprising indifference to the fate of the bond markets even though continuing turmoil there could make a real-world difference. That is because of the growing risk that borrowing costs start to derail the AI boom on which equity investors have relied. The US tech giants have increasingly turned to debt markets to fund their huge AI capital expenditure – and, if the cost of borrowing goes up, so does the hurdle rate for any investment.

Many have argued these companies are so cash-generative and powerful that a few basis points here or there on their debt will not hurt terribly much – but everyone has their limits, suggests Pete Doherty, head of fixed income at Titan Investment Solutions.

“Amazon did not issue the longest sterling bond in its recent funding round because, with the government bond plus the spread, it was going to have a 7% coupon on it,” he points out. “They said, “We are not paying seven’ – and, while that can change, it shows you there is a limit.”

Governments also have limits, notes Karen Ward, chief market strategist for Europe, Middle East and Africa at J.P. Morgan Asset Management. In this Financial Times piece, she recently argued they could not sustainably go much higher than 5% on 10-year bonds. Yet they are well above that level now, which – again – would suggest stockmarkets should be responding to the prospect of weaker growth.

According to Niamh Brodie-Machura, chief investment officer of equities at Fidelity, investors can only look through bond market turmoil for so long. “Typically, the bond market is not the most important factor for equities,” she says. “It is earnings, earnings, earnings – and yet, when there are sudden or very material movements in the bond market, it has to come right out of your peripheral vision and right into focus.”

When considering whether the bond market might break an equity bull run, there is no neat rule of thumb, says Brodie-Machura, adding: “There is no absolute number that means the equity market is fine or that it is going to fall. Instead, the circumstances surrounding it are more important.

“When you have gradually rising rates and yields, with a backdrop of good economic growth and – critically – good earnings, plus reasonable inflation, reasonable asset quality or credit spreads and reasonable financial conditions, then you have a circumstance where the equity market can either hold its ground or glide higher.”

In contrast, she warns, if yields rise suddenly – and where that rise is a function of rising expectations of fiscal risk, or because inflation is out of control, or financial conditions are distorted – then the equity market will tend to correct.

On the bright side, Brodie-Machura says, valuations still look reasonable. “We are at just over 20x earnings on the S&P,” she continues. “That is higher than some of the multiples we have seen through history but it is actually down since the start of the year.” She suggests the world learned from the financial crisis, so consumers and corporates, particularly large ones, have fixed their interest costs and are therefore less exposed.

There are also some big spending programmes supporting corporate growth – with J.P. Morgan Asset Management’s Ward pointing out these are actually coming out of the chaos in the global economy rather than being threatened by it.

“For 20 years before the pandemic, governments – particularly here in Europe – were focused on offshoring,” she explains. “We let the Americans take care of our defence; we let Russia and the Middle East take care of our energy; we let China take care of our manufacturing – and so forth.

“What has happened in the last few years is we have realised that is a pretty dangerous strategy because, when we rely on others, they can weaponise that dependence. Governments everywhere are having a massive rethink about that strategy and trying as fast as they can to reshore all of those activities.” This is creating vast multi-year spending programmes.

Companies are now also spending significant amounts on AI, as they seek to keep pace with their peers on productivity. These new technologies have thus been a significant new source of spending – and not just for the tech companies, but across multiple sectors, including banks and pharmaceutical businesses. “This rapidly changing, slightly chaotic world is generating multi-year, massive, hundreds of billions of pounds of spending, and it is that which is creating the growth,” Ward concludes.

Much of this spending is considered ‘mission-critical’ yet it will not – cannot – happen at any price. The fortunes of the bond market remain hugely important for the future health of the stockmarket and a key vulnerability in the final months of 2026.