IMP Global Megatrend Umbrella Fund Commentary

Global equities paused in December amid rising volatility, reflecting a mix of investor caution and broader macroeconomic uncertainties. Following a strong earnings season, markets saw a period of profit-taking as investors reassessed valuations and rotated capital. Emerging questions around AI monetization also contributed to short-term market jitters, as investors sought clarity on which companies could translate innovation into sustainable earnings. To a lesser extent, uncertainty over the timing and magnitude of potential Fed rate cuts added further pressure. Major U.S. indices, including the S&P 500 and Nasdaq Composite, largely stalled, continuing the trend observed since late October. While this slowdown may have caused short-term concern, it ultimately acted as a healthy consolidation, giving investors the opportunity to adjust positions, reassess risk, and take advantage of selective opportunities across regions and sectors. Within this context, the IMP Global Megatrend Umbrella Fund returned -2.01% in December, bringing its year-to-date performance to 8.53% net of fees.

A combination of strong structural trends, anticipated Fed rate cuts, and more supportive fiscal policies underpins a favorable backdrop for 2026. Elevated valuations are reinforced by momentum in AI, the resilience of the U.S. economy, and ongoing interest rate reductions. Investor attention has increasingly turned to equity valuations and concerns around a potential AI-driven market bubble. While market bubbles have historically coincided with major technological shifts, they typically evolve over time and only become obvious after they burst. Our approach evaluates the potential scale of investment and returns, providing a framework for tracking the AI transformation. We remain pro-risk and continue to see AI as a primary driver of U.S. equities. This environment is particularly favorable for active investing, allowing investors to identify winners among AI developers as adoption expands. The recent earnings season confirmed robust capital expenditure, reinforcing our positive assessment on AI-linked equities. Within technology, we advocate diversification across the AI value chain, with the application layer emerging as particularly attractive. Companies that successfully monetize investments are likely to gain market favor. While divergences will arise due to differing business models, we believe monetization can accelerate quickly if investor expectations increase.

Beyond AI, improving earnings momentum across U.S. equity sectors is driving a broader and more constructive market environment. As reiterated in earlier fund commentaries, we view current valuation levels as a secondary consideration for near-term performance. Global equities trade near 19× forward earnings, around 25% above the two-decade average, while the S&P 500 trades near 22× forward P/E, close to the upper end of its historical range. Significant deratings typically require a clear trigger, such as disappointing technology results or a shift from Fed cuts to hikes; both currently low-probability scenarios. Against this backdrop, we favor a blend of markets exposed to megatrends, including technological innovation in the U.S. and China, alongside cyclical opportunities in emerging markets and Europe. Beyond technology and utilities, we maintain a preference for healthcare and industrials across both the U.S. and Europe. Heading into 2026, our positioning reflects a favorable stance, underpinned by strong structural trends and accommodative monetary and fiscal policy. Within this environment, monetary policy continues to be a decisive factor for market sentiment. With the Fed expected to gradually lower rates and economic indicators softening, markets currently price in a high likelihood of cuts. Fiscal and macro improvements across regions further strengthen confidence in a favorable policy backdrop.

Currency markets are reflecting these dynamics. The U.S. dollar is expected to weaken modestly after its poorest annual performance since 2017, weighed down by persistent fiscal and current account deficits, a fading interest-rate advantage as Fed easing progresses, and continued reserve diversification by global investors. Together, these factors reduce the strategic appeal of concentrated dollar exposure at this stage of the cycle, favoring a more diversified currency approach. In contrast, the Swiss franc remains well supported by its safe-haven status, Switzerland’s strong external balance, low inflation, and limited SNB intervention, alongside tariff reductions that improve trade competitiveness. These structural and policy-related supports are likely to sustain franc strength into early 2026, particularly during periods of heightened market volatility and geopolitical tensions.

In December, we largely maintained our portfolio positioning, reflecting continued confidence in the current asset allocation. This approach remained consistent with our overarching megatrend strategy, ensuring that the portfolio retained meaningful exposure to high‑conviction themes while avoiding unnecessary dilution. Although several new opportunities were identified, we elected not to initiate additional positions, prioritizing focus and discipline over broadening the portfolio too rapidly. In line with our thematic emphasis on Mobility and Transportation, we continued to accumulate shares in our recently initiated holding in BYD Company Ltd., taking advantage of an attractive valuation and reinforcing our constructive view on the company’s long‑term prospects. BYD has emerged as a dominant force in the global EV market, with significant year‑on‑year vehicle delivery growth and expanding overseas sales that analysts see as a key driver of future profit expansion. The company’s vertically integrated production model, strong innovation pipeline, and broadening global footprint support its ability to sustain competitive advantages over the long term. In addition to automotive growth, BYD is advancing into consumer robotics, with humanoid household robots approaching commercial reality, offering an additional avenue for secular growth. These developments contribute and reinforce our conviction in BYD as a strategic, high‑conviction holding.

2026 has begun with a renewed reminder that geopolitical uncertainty remains elevated, highlighted by the U.S. arrest of Venezuelan President Nicolás Maduro and President Donald Trump’s tariff threats against European countries related to Greenland. Tensions also remain high in other regions, including between NATO and Russia, as well as in the Middle East. Historically, however, such geopolitical risks have not had a lasting impact on financial markets, and we expect investor focus to remain anchored on solid economic conditions and earnings fundamentals. While secular growth drivers should remain a robust tailwind for global equities, performance is expected to broaden in 2026. The macro backdrop appears constructive, as economic growth is likely to trough with the fading of tariff headwinds, the Federal Reserve is expected to cut rates, and fiscal policy is becoming more supportive across regions, including the United States and Europe. Together, these dynamics favor cyclical sectors and regions as potential sources of positive surprises next year.

A key near-term risk is a pending Supreme Court ruling on the legality of U.S. tariffs. Should the tariffs be deemed illegal, this could precipitate financial market destabilization and heightened volatility. Even if such a ruling were issued, we anticipate the U.S. administration would seek to uphold tariffs through alternative mechanisms, though this outcome would not necessarily exert less pressure on market stability. Moreover, potentially renewed tariff threats constitute an unwelcome tail risk, as the resulting uncertainty would likely unsettle financial conditions. Despite these potential disruptions, strong structural themes, combined with an improving macroeconomic conducive environment, continue to support a resilient outlook in the broader context. While evolving dynamics may introduce higher volatility, potentially underappreciated by markets, the overall environment remains favorable for earnings growth and broad equity performance.

Thank you for your continued trust and support.

Stefan Wiederkehr & Karin Wiederkehr

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IMP Global Megatrend Umbrella Fund Commentary - 31 December 2025