December 2025

“Blacheville smiles with the self-satisfied smugness of a man whose vanity is tickled.” Victor Hugo

It is a well-known fact among market history nerds that stock performance (SPX index) in years ending in ‘5’ is always positive, especially in the even decades, where the ‘5’ marks the first year of a presidential administration. Since the Great Depression only 2015 had a negative price return (although total returns were slightly positive), but 2025 emphatically reaffirmed the trend. It was also the third year in a row and the sixth of seven years of above average returns, evoking the great bull run of the 1980s-90s. Of course, that period was built on prolonged disinflation, global deregulation, several waves of tech innovation (PCs, internet) and ultimately the post-cold war peace dividend. Will the current tech wave plus an overdose of excess liquidity be enough to continue the party into 2026 and beyond? Perhaps, but a little bit of scepticism may be warranted…

Activity in December was muted, not a surprise given the overall tone for the year. As expected, the Fed cut rates, almost appearing to hold their nose while they did it. This felt more like a concession than a policy statement and given that it was widely anticipated it barely made a ripple in markets. Elsewhere the usual cocktail of geopolitical uncertainties and mixed data lay fallow amidst the early arrival of a holiday vibe, awaiting a return to the fore in the new year.
The fund’s A shares rose +0.71% net of fees for the month,with gross contributions from credit (+82bps) and equities (+3bps).

The fund finished the year up +16.2% net. Notably, returns have been generated while portfolio volatility has remained subdued just 3.7% for the year, a function of both environment and the deliberate decisions that went into the construction of the portfolio. We are mindful that prolonged periods of low volatility rarely end with a whimper for credit funds, and so we will enter the new year with the same defensive posture we have maintained for some time, well-positioned and prepared for opportunities that present themselves.