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Our market summary
In the third quarter of 2026, geopolitical tensions in the Middle East pushed oil and gas prices higher, adding to inflation pressures and prompting many central banks to raise interest rates. Despite this backdrop, economic growth remained stronger than expected, while company earnings generally continued to improve.
Performance review
The Cirilium Portfolios delivered mixed returns over the third quarter of 2026, with returns ranging from a 2.0% fall for the Conservative Portfolio, to a 0.8% gain for the Adventurous Portfolio. The main market moves were sharp rises in bond yields as investors began to focus again on inflation given increases in energy prices. For the US, high levels of AI-driven growth also resulted in higher rate expectations, while France faced concerns around perceived fiscal credibility. This negatively impacted the lower-risk portfolios, which hold a greater allocation to bonds. Equity markets drifted slightly higher as they consolidated the strong gains from the prior quarter. However, the small moves at the index level masked some sector moves under the surface, with energy companies delivering strong returns while industrial companies and utilities struggled.
The performance figures shown refer to past performance. Past performance is not a reliable indicator of future performance.
Equity
How our equity holdings performed
Japan continues to perform well
Japanese equities were the best performing region during the third quarter, and this was reflected by strong performance from our main active holding, the M&G Japan Fund, which gained 5.9%. Japan’s economy is returning back to ‘normal’ following many years of deflation, and this is prompting increased interest in the stock market from retail investors, coupled with a number of shareholder-friendly corporate governance reforms.
Europe is weaker
European equities have been hit with a number of issues, from a dependence on high cost imported energy (impacting German industrial companies) to political uncertainty weighing on risk appetite (the French stock market is the only market in Europe with negative returns so far this year). As a result, fund performance was underwhelming, although all managed to slightly outperform their benchmarks over the quarter, with the Fidelity European Fund outperforming its benchmark by 2.7%.
Mid- and small-cap managers have contrasting experiences
During the quarter, our managers with a bias toward mid and smaller companies delivered a wide range of returns, depending on their focus region. For example, the J O Hambro UK Dynamic Fund gained 4.1%, helped by its holding in advertising company WPP, which delivered a sharp increase following strong earnings. In contrast, US smaller companies struggled given their sensitivity to higher interest rates, leaving our new holding, the Artemis US Smaller Companies Fund, nursing a 6.3% loss for the period.
Fixed income
How our fixed-income holdings performed
Bond managers struggle amid rising yields
The market backdrop of rising yields (10-year maturity gilt yields increased by 0.65% over the period) meant that all our bond managers delivered negative returns over the quarter. In general, our corporate bond managers were positioned somewhat defensively and as a result slightly outperformed their benchmarks. Our best performing holding was the BNY Mellon Global Short-Dated High Yield Bond Fund (down 0.4% for the quarter), aided by a low sensitivity to interest rates and a high income from its underlying portfolio.
Alternatives
How our alternatives holdings performed
Alternatives managers contribute positively
Our alternatives holdings diverged materially over the period, with the L&G Multi-Strategy Enhanced Commodities ETF gaining 16.1% as it benefitted from the increase in energy prices. The AQR Managed Futures Fund gained 9.5%, benefitting from strong positive trends in commodities and negative trends in government bonds. Against this, the Cooper Creek Noth American Long Short Equity Fund struggled amid sector rotations, giving back most of its gains from the first half of the year.
Cumulative returns over periods shown to 30 September 2026
| YTD | 1 year |
3 years |
5 years |
Since launch | |
| Cirilium Conservative | 0.9 | 2.9 | 14.6 | 0.9 | 56.2 |
| IA Mixed 0-35% | 2.6 | 4.8 | 22.3 | 11.3 | 65.0 |
| Cirilium Balanced | 3.7 | 6.2 | 22.8 | 10.1 | 158.7 |
| IA Mixed 20-60% | 5.3 | 8.2 | 30.3 | 21.3 | 125.9 |
| Cirilium Moderate | 6.5 | 9.5 | 31.4 | 17.0 | 237.1 |
| IA Mixed 40-85% | 8.4 | 12.1 | 39.4 | 31.7 | 188.8 |
| Cirilium Dynamic | 8.5 | 12.1 | 38.9 | 21.1 | 266.8 |
| IA Flexible | 9.0 | 12.5 | 40.4 | 33.0 | 187.7 |
| Cirilium Adventurous | 10.1 | 14.0 | 42.6 | 25.8 | 68.3 |
| IA Flexible | 9.0 | 12.5 | 40.4 | 33.0 | 74.3 |
Discrete annual returns over periods shown to 30 September
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Cirilium Conservative | 2.9 | 3.1 | 8.0 | 1.0 | -12.8 |
| IA Mixed 0-35% | 4.8 | 5.4 | 10.7 | 2.7 | -11.3 |
| Cirilium Balanced | 6.2 | 5.4 | 9.7 | 2.7 | -12.7 |
| IA Mixed 20-60% | 8.2 | 7.4 | 12.1 | 4.2 | -10.7 |
| Cirilium Moderate | 9.5 | 7.4 | 11.7 | 3.8 | -14.2 |
| IA Mixed 40-85% | 12.1 | 9.3 | 13.8 | 5.3 | -10.3 |
| Cirilium Dynamic | 12.1 | 9.2 | 13.4 | 4.4 | -16.4 |
| IA Flexible | 12.5 | 10.4 | 13.0 | 4.8 | -9.6 |
| Cirilium Adventurous | 14.0 | 10.2 | 13.5 | 3.6 | -14.8 |
| IA Flexible | 12.5 | 10.4 | 13.0 | 4.8 | -9.6 |
| Holding name | Fund manager (where applicable) | Cirilium Conservative | Cirilium Balanced | Cirilium Moderate | Cirilium Dynamic | Cirilium Adventurous |
| Global equity | 20.70 | 43.51 | 64.17 | 82.89 | 99.30 | |
| Asia Pacific equity | 3.03 | 5.70 | 8.53 | 10.70 | 12.21 | |
| Baillie Gifford Japan Trust | Baillie Gifford | 0.27 | 0.45 | 0.69 | 0.90 | 1.01 |
| Fidelity Asia Pacific Opportunities | Fidelity | 0.26 | 0.31 | 0.80 | 0.98 | 1.22 |
| Jupiter Asia Pacific | Jupiter | 0.73 | 0.78 | 2.20 | 2.75 | 3.22 |
| M&G Japan | M&G | 1.29 | 2.32 | 3.40 | 4.32 | 5.21 |
| MSCI AC AP ex Japan (EUR) Dec 26 | -1.04 | -1.17 | -2.97 | -3.71 | -4.37 | |
| MSCI Pacific ex JP NTR (EUR) Dec 26 | 0.75 | 1.17 | 1.88 | 2.28 | 2.67 | |
| Topix (OSE) Dec 26 | 0.77 | 1.82 | 2.53 | 3.18 | 3.26 | |
| Corporate convertible | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |
| APQ Global Limited 3.5% 30/09/24 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |
| Emerging markets equity | 4.61 | 7.61 | 10.32 | 12.95 | 14.59 | |
| JPM Emerging Markets Investment Trust | J.P. Morgan | 0.26 | 0.47 | 0.67 | 0.87 | 0.99 |
| Pacific North of South EM All Cap Equity | Pacific Capital Partners | 1.66 | 2.46 | 3.67 | 4.57 | 5.28 |
| Ashmore Emerging Markets Equity Fund | Ashmore | 0.99 | 1.79 | 2.69 | 3.38 | 3.95 |
| MSCI Emrg Markets Mini (IFUS) Dec 26 | 1.70 | 2.89 | 3.29 | 4.13 | 4.37 | |
| European equity | 1.89 | 5.49 | 8.48 | 11.21 | 14.52 | |
| Fidelity European | Fidelity | 0.00 | 0.27 | 0.37 | 0.47 | 0.52 |
| Fidelity European Trust | Fidelity | 0.50 | 0.90 | 1.31 | 1.74 | 2.02 |
| Liontrust GF Pan-European Dynamic | Liontrust | 0.93 | 2.16 | 3.10 | 4.02 | 4.69 |
| M&G European Strategic Value | M&G | 1.11 | 2.30 | 3.27 | 4.25 | 4.94 |
| Premier Miton European Opportunities | Premier Miton | 0.61 | 1.19 | 1.67 | 2.18 | 2.56 |
| Euro STOXX (EUR) Dec 26 | 0.11 | 0.03 | 0.10 | -0.10 | -0.21 | |
| Euro STOXX 50 (EUR) Dec 26 | 1.26 | 1.23 | 1.23 | 1.23 | 0.00 | |
| SX5E 10/16/26 P6550 | -2.63 | -2.59 | -2.57 | -2.57 | 0.00 | |
| Global equity | 1.53 | 2.71 | 3.95 | 5.17 | 6.01 | |
| Monks Investment Trust | Baillie Gifford | 0.26 | 0.46 | 0.67 | 0.89 | 1.04 |
| Quilter Investors Global Equity Value | Redwheel | 1.27 | 2.25 | 3.28 | 4.28 | 4.98 |
| North American equity | 4.86 | 11.83 | 17.69 | 23.35 | 28.32 | |
| Brandes US Value | Brandes | 1.56 | 3.43 | 4.83 | 6.50 | 7.07 |
| Federated Hermes MDT US Equity | Federated Hermes | 1.37 | 2.81 | 4.03 | 5.27 | 5.57 |
| JPM Active US Growth ETF | J.P. Morgan | 1.46 | 3.20 | 4.58 | 6.01 | 6.57 |
| JPMorgan American Investment Trust | J.P. Morgan | 0.26 | 0.49 | 0.69 | 0.91 | 1.01 |
| Logica Asymmetric Beta Fund | 0.72 | 1.43 | 2.04 | 2.64 | 2.97 | |
| Pershing Square Holdings | Pershing Square | 0.25 | 0.39 | 0.59 | 0.77 | 0.91 |
| Sands Capital US Select Growth | Sands Capital | 0.37 | 0.89 | 1.22 | 1.57 | 1.76 |
| Artemis US Smaller Companies Fund | Artemis | 0.41 | 0.92 | 1.22 | 1.68 | 1.93 |
| eMini S&P 500 (CME) Dec 26 | 2.48 | 2.48 | 2.44 | 2.41 | 0.00 | |
| Mini Russell 1000 Growth (CME) Dec 26 | 0.30 | 0.45 | 0.69 | 0.89 | 1.05 | |
| Mini Russell 1000 Value (CME) Dec 26 | -0.29 | -0.45 | -0.66 | -0.84 | -1.02 | |
| MSCI USA USD GTR (EUR) Dec 26 | 0.21 | -0.11 | 0.11 | -0.39 | 0.50 | |
| SPX US 10/16/26 P7765 | -4.24 | -4.13 | -4.09 | -4.06 | 0.00 | |
| Private equity | 0.50 | 0.92 | 1.32 | 1.75 | 2.04 | |
| Eurovestech PLC | Eurovestech | 0.00 | 0.00 | 0.00 | 0.03 | 0.00 |
| HarbourVest Global Private Equity | Harbourvest | 0.25 | 0.46 | 0.66 | 0.86 | 1.01 |
| Pantheon International | Pantheon | 0.25 | 0.47 | 0.66 | 0.86 | 1.03 |
| UK equity | 4.27 | 9.25 | 13.88 | 17.77 | 21.61 | |
| Finsbury Growth & Income Trust | Lindsell Train | 0.25 | 0.43 | 0.64 | 0.83 | 0.98 |
| Invesco UK Opportunities | Invesco | 1.62 | 3.24 | 4.28 | 5.61 | 6.44 |
| J O Hambro UK Dynamic | J O Hambro | 0.77 | 1.54 | 2.18 | 2.86 | 3.23 |
| LF Equity Income | Woodford | 0.00 | 0.03 | 0.04 | 0.06 | 0.00 |
| Quilter Investors UK Equity | Jupiter | 1.59 | 3.27 | 4.97 | 6.28 | 7.13 |
| Quilter Investors UK Equity Growth Fund | Jupiter | 0.50 | 0.97 | 1.44 | 1.93 | 2.23 |
| BH Macro | 0.52 | 0.51 | 0.50 | 0.25 | 0.00 | |
| FTSE 100 (IFEU) Dec 26 | 0.17 | 0.00 | 0.16 | -0.15 | -0.39 | |
| The City of London Investment Trust | Janus Henderson | 0.51 | 0.91 | 1.32 | 1.74 | 2.00 |
| UKX 10/16/26 C10975 | 0.18 | 0.17 | 0.17 | 0.17 | 0.00 | |
| UKX 10/16/26 P10950 | -3.63 | -3.62 | -3.60 | -3.58 | 0.00 | |
| UKX 10/16/26 P10975 | 1.81 | 1.79 | 1.78 | 1.78 | 0.00 | |
| Fixed income | 65.19 | 45.06 | 24.75 | 10.57 | 0.00 | |
| Corporate bonds | 30.09 | 18.30 | 9.51 | 4.04 | 0.00 | |
| BNY Mellon Global Credit | BNY Mellon | 4.92 | 2.24 | 1.53 | 0.00 | 0.00 |
| BNY Mellon Global Short-Dated High Yield Bond | BNY Mellon | 4.00 | 4.00 | 2.00 | 0.00 | 0.00 |
| Quilter Investors Corporate Bond | Premier Miton | 10.46 | 5.63 | 1.96 | 2.00 | 0.00 |
| Quilter Investors Sterling Corporate Bond | Fidelity | 5.02 | 2.71 | 1.03 | 1.03 | 0.00 |
| Schroder Strategic Bond | Schroders | 5.69 | 3.73 | 3.00 | 1.01 | 0.00 |
| Government bonds | 27.14 | 21.80 | 11.79 | 6.53 | 0.00 | |
| Invesco UK Gilt 15+ Year ETF | Invesco | 1.31 | 1.09 | 0.55 | 0.74 | 0.00 |
| iShares UK Gilts 0-5yr ETF | BlackRock | 2.27 | 1.91 | 0.94 | 1.25 | 0.00 |
| PIMCO Advantage Global Government Bond ETF | PIMCO | 15.08 | 12.68 | 7.73 | 3.01 | 0.00 |
| Vanguard US Government Bond Index | Vanguard | 5.05 | 3.50 | 1.23 | 0.00 | 0.00 |
| 10Y Japan Govt Bond (OSE) Dec 26 | 0.46 | 0.79 | 0.29 | 0.00 | 0.00 | |
| 2Y T-Note Dec 26 Future | -4.05 | -3.87 | -1.99 | 0.00 | 0.00 | |
| Euro Bund Germany (EUR) Dec 26 | 0.48 | 1.28 | 0.44 | 0.00 | 0.00 | |
| Long Gilt Dec 26 Future | 1.50 | 1.18 | 0.55 | 0.75 | 0.00 | |
| Vanguard UK Infl-Linked Gilt Index Fund | Vanguard | 5.02 | 3.25 | 2.05 | 0.78 | 0.00 |
| Other fixed income | 7.96 | 4.96 | 3.45 | 0.00 | 0.00 | |
| Wellington Opportunistic Fixed Income | Wellington | 7.96 | 4.96 | 3.45 | 0.00 | 0.00 |
| Alternatives | 9.70 | 9.75 | 9.75 | 4.92 | 0.05 | |
| Alternative equity | 2.90 | 2.89 | 2.84 | 1.44 | 0.00 | |
| Cooper Creek North America Long Short Equity | Cooper Creek Partners | 0.74 | 0.70 | 0.69 | 0.34 | 0.00 |
| Neuberger Berman Event Driven | Neuberger Berman | 1.44 | 1.44 | 1.42 | 0.73 | 0.00 |
| Quilter Investors Long-Short Equity | J.P. Morgan | 0.71 | 0.75 | 0.73 | 0.37 | 0.00 |
| Alternative fixed income | 0.72 | 0.70 | 0.70 | 0.36 | 0.00 | |
| Schroder Alternative Income | Schroders | 0.72 | 0.70 | 0.70 | 0.36 | 0.00 |
| Alternative other | 3.96 | 4.03 | 4.04 | 2.05 | 0.05 | |
| AQR Managed Futures | AQR | 1.75 | 1.76 | 1.80 | 0.87 | 0.00 |
| International Public Partnerships Limited | Amber Infrastructure | 0.58 | 0.56 | 0.56 | 0.28 | 0.00 |
| Pantheon Infrastructure | Pantheon | 0.55 | 0.60 | 0.57 | 0.33 | 0.00 |
| Man Multi-Manager Alternative | 1.03 | 1.07 | 1.05 | 0.52 | 0.00 | |
| VIX US 10/21/26 C17.5 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | |
| Commodities | 2.12 | 2.13 | 2.16 | 1.08 | 0.00 | |
| iShares Physical Gold ETC | BlackRock | 0.39 | 0.40 | 0.39 | 0.19 | 0.00 |
| L&G Multi-Strategy Enhanced Commodities ETF | L&G | 0.79 | 0.82 | 0.87 | 0.46 | 0.00 |
| UBS CMCI Commodity Carry ETF | UBS | 0.94 | 0.90 | 0.91 | 0.43 | 0.00 |
| Cash | 4.42 | 1.68 | 1.33 | 1.61 | 0.65 | |
| Cash | 4.42 | 1.68 | 1.33 | 1.61 | 0.65 | |
| BlackRock ICS Sterling Liquidity | BlackRock | 0.00 | 0.03 | 0.00 | 0.71 | 3.22 |
| BlackRock ICS Sterling Ultra Short Bond | BlackRock | 0.00 | 0.00 | 0.00 | 0.01 | 1.74 |
| Cash | 4.42 | 1.65 | 1.33 | 0.88 | -4.31 | |
| UK Governmnet 0.5% 22-oct-2061 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Please note due to rounding of figures they may not add up to 100%. Asset allocation may include derivative exposure which may be offset against cash exposure.
The performance figures shown refer to past performance. Past performance is not a reliable indicator of future performance.
Source: Quilter and Morningstar as at 30 September 2026. Total return, percentage growth, net of fees of the R (GBP) accumulation shares over periods shown. The performance of other share classes may differ. The Cirilium Conservative Portfolio launched on 30 March 2012, the Cirilium Balanced Portfolio, the Cirilium Moderate Portfolio, and the Cirilium Dynamic Portfolio launched on 2 June 2008, and the Cirilium Adventurous Portfolio launched on 1 June 2017.
Portfolio changes
The main asset allocation change over the quarter was our annual strategic asset allocation (SAA) update at the start of the quarter. This introduced index-linked gilts as a new asset class within fixed income, as we looked to increase the resilience of the portfolios in the event of inflation shocks in the future. This was funded by a reduction in the global bond allocation, with a reduction in weight of both global government bonds and global corporate bonds. Within equities, the SAA exposure to Japanese equities increased, largely at the expense of North American and UK equities. The alternatives allocation remained unchanged. Separately, there were no material changes to our tactical asset allocation tilts – the key positions remain overweight emerging markets equities and underweight UK nominal government bonds, with the latter tilt being increased slightly in the lower-risk portfolios.
New holdings
- Artemis US Smaller Companies Fund
We added this to give some exposure to US smaller companies, which should perform well in an environment of fair to strong economic growth. The manager has a bottom-up process and is style agnostic, focusing on companies with asymmetric upside potential. - Quilter Investors UK Equity Fund (managed by Invesco)
This is a core UK equity holding that is systematically managed. It aims to screen for companies that are good value, have high-quality fundamentals, and also positive momentum. The strategy allows for some short positions in companies that fail on those metrics. - Ashmore Emerging Markets Equity Fund
This is a growth-tilted holding that should complement the existing emerging markets exposures in the portfolios, which are somewhat more value oriented. The manager looks to own high-quality, long term growth companies with strong discipline around capital allocation. - Man Multi-Manager Alternative Fund
This is a hedge fund that allocates across a number of individual strategies run by independent teams within Man Group, a large alternatives manager. Each strategy uses different investment styles and focuses on separate areas of the markets. - Vanguard UK Inflation-Linked Gilt Index Fund
This is a physically replicated passive fund that tracks the index used in our SAA to represent UK inflation-linked government bond exposure.
Removed holdings
- Berkshire Hathaway Inc.
We sold out of our residual position at the start of the quarter, having started to sell in 2025 following Warren Buffet’s announcement of his retirement. The cash raised from this sale was used to purchase the Logica Asymmetric Beta Fund. - Wellington Global Credit ESG Fund
We removed this fund as part of a reduction in overall global corporate bond exposure in our updated SAA. We retained positions in our preferred funds, BNY Mellon Global Credit Fund and Schroder Strategic Bond Fund. - Wellington Global Total Return Fund
We completed an exit of this position to partly fund our new holding in the Man Multi-Manager Alternative Fund, following somewhat lacklustre performance over the past couple of years. - Jupiter Global Equity Absolute Return Fund
We completed an exit of this position to partly fund our new holding in the Man Multi-Manager Alternative Fund. We are comfortable selling, despite strong recent performance, due to similar equity systematic exposure held elsewhere in the portfolios. - Brevan Howard Absolute Return Government Bond Fund
We completed an exit of this position to partly fund our new holding in the Man Multi-Manager Alternative Fund. We felt that the global macro environment was becoming increasingly hard for the managers to deliver outperformance. - iShares GBP Index-Linked Gilts UCITS ETF
We replaced this holding with the Vanguard UK Inflation-Linked Gilt Index Fund that was materially larger, with accompanying operational and liquidity benefits.
Investment outlook
As we head into the final quarter of the year, markets are sending mixed signals, amid ongoing geopolitical uncertainty and inflationary concerns centred around petrol prices and related energy shortages. Government spending and persistent deficits have been in focus on both sides of the Atlantic. US mid-term elections are likely to be more noisy than genuinely relevant for the equity markets, where we expect AI build-out to remain the centre of attention.
Government bond markets showing signs of distress…
Government bond yields have risen sharply over the quarter, despite the best efforts of politicians to talk them lower. These increases have been driven by both higher real yields and increases in expected inflation and are partly a consequence of better-than-expected growth but also driven by concerns around fiscal credibility – namely the inability of governments to control budgets. Levels are starting to look attractive, but we are somewhat wary of adding until we have some confidence that they are stabilising.
…while equities remain focussed on AI
Interest-rate sensitive parts of the equity market (such as utilities and small caps) have struggled, but overall the large-cap technology companies have reasserted their dominance. Interestingly, their strong recent earnings and relatively muted price performance has meant that valuation multiples based on expected earnings have receded somewhat from their highs late last year. One concerning aspect is poor market breadth, with only a few companies driving markets near all-time highs – this bears watching closely.
Continued earnings growth will likely be critical
We are moving into a ’show me‘ phase of AI, with investors starting to probe whether continued extravagant spending will result in future revenue and earnings growth. To that end, we will be carefully watching the upcoming earnings announcements to see if the hyperscalers can start to show specific AI-related profits as proof of concept. If they struggle to convince, then one of the key pillars of equity market strength will start to come into question, which could drive consolidation, or alternatively weakness, into year end.
Approver: Quilter October 2026
QIP 24002/25/19214
