What happened in portfolios
Peter Daly
Head of Multi Asset Solutions
Performance update
The developments in the Middle East over the final weekend of the month occurred after markets had already closed, so their impact did not affect February’s reported returns. In February, portfolio values rose by +1.0% to +2.2% supported by gains in equity and bond markets of +1.6% and +1.3% respectively.
Over the first two months of the year, Cautious Growth portfolios increased by +2.4%, Moderate Growth by +3.0%, Long Term Growth by +4.0% and Equity Growth by +4.3%. The GPS funds delivered similar returns across risk profiles. The returns compare favourably relative to equivalent equity/bond asset blends, with global equities rising +3.6% and global bonds +1.4% over the same period (all figures are in euro terms).
Portfolio commentary
US equities continued to lag, finishing the month as the weakest regional market. The S&P 500 edged down –0.1%, but this modest headline figure masked significant dispersion within the index. The market stalwarts of the modern era, the Magnificent 7, have begun to stutter, and in aggregate fell by 7%; dragging the technology, consumer discretionary and communication services sectors down with them. More value oriented and less technology-sensitive sectors such as energy, utilities and materials, as well as small-caps benefitted from the rotation away from the AI theme.
Equity markets outside the US were also well positioned to gain from this shift, being less expensive, having less in technology and growth, and a higher tilt to value, high-dividend and low-volatility factor exposures.
Figure 1: Year to date regional equity market performance
Source: Bloomberg, in euro. Year – to-date: 31-Dec-25 to 28-Feb-26
This dynamic was supportive for our active equity positions, both across equity tactical calls and active managers. Our deliberate underweight to US mega caps results in a 7% underweight to the Magnificent 7 group – a meaningful tailwind to returns. Combined with regional equity market strength, this contributed to broad-based outperformance in our equity tactical calls (see figure 2).
Figure 2: Year to date performance of equity tactical calls
Source: Bloomberg, in euro. Year-to-date: 31-Dec-25 to 28-Feb-26. Performance is shown relative to the funding source of the call, which is global developed market equities in all cases.
Note 1: The size of the Latam equities call was reduced in February 2026
Note 2: Performance of the emerging markets equity call is since inception in January 2026
Active manager performance was similarly robust. Regional active managers, the Acadian European and Wellington EM equity funds outperformed, as did global equity managers Blackrock Global Equity Income and Acadian Global Managed Volatility. The SGA Global Equity Growth fund has underperformed and is -7.8% lower year to date; largely a result of exposure to software companies within the fund. Software valuations have come under pressure over recent quarters, a trend that intensified in early 2026 as investors reassessed the resilience of software company moats and high margins in the face of AI‑driven displacement. Recent releases from AI firms, including new plug‑ins from Anthropic, have sharpened these concerns.
SGA’s software exposure continues to be the main source of underperformance. The SGA team are dynamic in their ongoing management of these exposures, exiting positions where they identified fundamental displacement risk (such as Workday, where growth deceleration suggested genuine share loss) while maintaining conviction in platforms where evidence supports continued franchise strength and positioning for AI‑driven growth acceleration. Given the concentrated nature of their portfolio, periods of relative underperformance are not unusual, and we will continue to monitor their positioning closely.
Despite this outlier, the performance of the equity book in portfolios; reflecting a combination of active managers, passive managers and tactical calls; has returned 4.6%, comfortably ahead of the global equity benchmark.
Portfolio Changes
We reduced by half the tactical overweight to Latam equities in February.
This position was built up in two equal phases, the first in May 2025 and the second in September 2025. The call has performed exceptionally well as Donough noted, outperforming global equities by nearly 30%. The call is a good demonstration of our active asset allocation across and within asset classes, guided by our assessment of opportunities and risks in the current market environment. The sale proceeds were reallocated back to benchmark global equities.
If you have any questions on the portfolio change, please contact your Davy Private Client Adviser.
Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.
Warning: Forecasts are not a reliable indicator of future performance.
Important Notice: The information presented in the “What Happened in Portfolios” section relates solely to our standard discretionary accounts. It is provided for informational purposes only for advisory clients and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security or strategy. Portfolio actions described may not be appropriate for all clients and may differ from activity in non‑discretionary or custom‑mandate accounts. For details on the discretionary service level, please see discretionary and advisory professional terms.
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