Investment Report- November 2025

Crossing Point have made several changes to the Heritage portfolios to reflect recent developments in global markets, valuations, and trade policy.

Macroeconomic Backdrop
Global markets still face a mix of slowing labour market momentum and tariff-driven frictions. Since September, central-bank rhetoric has tilted cautiously dovish as softer data lifts the odds of incremental rate cuts, but policymakers are stressing data-dependence given sticky inflation, particularly in the UK, keeping yields choppy. At the same time, US-China tensions have flared around critical mineral export controls, reinforcing supply-chain and pricing risks even as leaders signal scope for renewed dialogue.

In response to this environment, we have taken steps to further diversify the portfolio, spreading risk more evenly across asset classes and regions. This approach aims to reduce sensitivity to any single market driver while maintaining participation in areas with stronger structural and valuation support.

Investment Trust Overview: Boards continue to address discount levels through buybacks, mergers and wind-ups, helping to stabilise valuation levels across the sector. Reflecting this activity and improved supply-demand dynamics, our portfolios now report discounts in the range of -3.1% to -1.8%* as of 31 October 2025, approximately half the level seen previously. At the same time, gearing across our holdings has been reduced to between 3.1% and 1.6%*, aligning with our broader shift to a less risky, more diversified allocation. These developments support the view that active trust boards are managing capital structures effectively and creating a more favourable environment for patient, long-term investors.

Equities
Global & US: We have slightly reduced our overall global allocation but maintained a broad exposure, with the largest holdings remaining well diversified and cost-efficient. Within the global allocation, we have refined our mix by rotating into funds with stronger performance and clearer growth focus, while also adding an income-oriented holding to enhance diversification. We have retained our global small-cap exposure, as recent momentum and improving returns in this area provide balance against reduced small-cap exposure elsewhere.

For the US allocation, we have maintained our core growth and blended large-cap holdings, both of which continue to deliver strong long-term returns. However, we have removed our US small-cap fund, replacing it with an income-focused strategy that offers greater stability and a value tilt. This adjustment strengthens diversification within the sector while positioning the allocation to better navigate the shifting US macro environment.

Europe: European equities have continued to perform strongly this year, supported by improving earnings momentum, stabilising inflation, and resilient consumer data. Valuations remain reasonable relative to the US, though elevated in certain growth sectors, and fiscal support across key economies continues to underpin sentiment. We have increased our European allocation to reflect both stronger performance and previous underweighting. The allocation now combines large-cap growth and income strategies with a new small and mid-cap holding, offering greater diversification and positioning us to benefit from areas of the market showing sustained momentum.

UK: We have increased our UK allocation to take advantage of continued undervaluation and to enhance the portfolio’s yield and value profile. The allocation has been fully refreshed, shifting towards large-cap and value-focused trusts with stronger performance, higher income, and lower volatility. A new highly active investment replaces the previous pure small-cap holding, maintaining a reduced small-cap exposure while broadening the opportunity set across the wider UK market. Despite ongoing inflation and fiscal pressures, the UK remains attractively priced, and this repositioning should provide greater stability while reducing reliance on higher-growth sectors such as technology.

Japan: Political uncertainty has contributed to heightened volatility in Japanese markets, adding to existing challenges from currency weakness and demographic pressures. While we continue to hold a relatively overweight position in Japan through our two existing Japanese trusts, we have reduced the overall weighting to bring it more in line with other regions. The allocation maintains exposure to high-quality, income-generating holdings with strong long-term records, allowing participation in Japan’s structural reforms while managing short-term instability.

Pacific & Emerging Markets: We have reduced our Pacific exposure to limit overall concentration in China, as many of the Pacific and emerging market trusts already hold significant Chinese positions. This brings a better balance as we are retaining the Chinese weighting within emerging markets. The Pacific allocation now focuses on two core holdings, offering a blend of income and growth with broader regional diversification.
Within emerging markets, we have exited our dedicated Indian trust to reduce concentration risk and shifted toward a more diversified mix of holdings. The allocation now combines a China-focused strategy with broader regional funds offering exposure to markets such as India, South Africa, and Taiwan. These changes reduce sensitivity to Chinese market volatility while maintaining participation in areas showing stronger performance and attractive yield potential.

Sector-specific Adjustments
In our sector-specific allocation, we have again included a few unit trusts for exposure within infrastructure, clean energy and gold. These choices reflect relative advantages in performance, availability, and cost efficiency. The remainder of our equity allocation, including technology holdings, continues to be implemented through investment trusts, where we continue to see strong value in active oversight and structural flexibility.

Infrastructure: Infrastructure continues to perform well, supported by strong trends and renewed investor interest in the asset class. We have added a new global fund with significant exposure to Europe and the US to take advantage of announced stimulus measures and ongoing fiscal investment. The holding also provides an effective inflation hedge, which may prove valuable should price pressures re-emerge over the coming months, while adding diversification to equities. Overall, the allocation offers stability and protection in an uncertain macro environment.

Technology: We have maintained our technology allocation but made a slight reduction to reflect high valuations and ongoing volatility in the sector. Given the existing heavy exposure to technology through our global and US holdings, this adjustment helps balance the overall portfolio. Our fund selection remain unchanged, as they continue to be the strongest performers in the sector, offering high-quality exposure to long-term structural growth themes.

Clean Energy:
We have maintained our clean energy allocation, which continues to perform strongly and provides valuable diversification within the portfolio. The sector remains well supported by long-term decarbonisation trends and policy initiatives, while our current holding has shown consistent returns and strong momentum. This exposure complements our broader equity positions by aligning with structural sustainability themes and offering participation in one of the market’s most dynamic growth areas.

Financials:
We have removed our financials allocation following a period of weaker performance and heightened uncertainty in the sector. Despite strong earnings reported by major U.S. banks, the recent news surrounding regional banking troubles has added to volatility and downside risk. Given these developments, we believe this is an appropriate point to exit the position and reallocate to areas with stronger trends and more resilient fundamentals.

Gold: We have added a gold allocation following a period of increased investor demand for defensive assets. In the context of a more uncertain and volatile macro environment, gold offers both diversification and protection from fluctuations and weakness in the US dollar, recessionary pressures, and global and political risks. This addition provides a potential hedge against market stress and inflation, enhancing the portfolio’s overall resilience.

Fixed Income
Our fixed income exposure continues to be fully implemented via unit trusts, a decision driven by cost efficiency, availability, and the ability to maintain flexibility in managing duration and credit risk.

We have made several adjustments to our fixed income allocation to better reflect current market conditions and growth expectations. The weighting across investment-grade bonds has been rebalanced, with the European allocation now lower than both the US and UK, as prospects in the latter two appear more favourable. We have removed all region-specific government bond funds due to elevated uncertainty but retained our global bond funds, which provide diversified exposure to sovereign debt. Additions include an emerging market bond fund, benefiting from high yields, improving sentiment and recent strong performance, and a UK short-term bond fund to broaden corporate exposure. We have also replaced all high-yield holdings with a strategic bond fund, increasing our active allocation to take advantage of volatility and interest rate shifts in the months ahead.

*Discount and premium calculations are made in proportion to the entire portfolio inclusive of mutual fund holdings.

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