2026 Mid-Year Fund Review: Dynamic Duration

The first half of 2026 was marked by considerable volatility across global bond markets. Investors contended with persistent inflationary pressures, evolving monetary policy expectations and heightened geopolitical uncertainty. In this challenging environment, the fund’s ability to dynamically allocate between duration exposure and inflation protection enabled it to adapt more effectively than traditional bond strategies.

Inflation-linked positions provided an important source of resilience during periods when rising energy prices and geopolitical developments fuelled inflation concerns. Conversely, duration exposure benefited when disinflationary trends re-emerged and expectations for monetary easing supported fixed income markets.

The period reinforced the value of a flexible, rules-based approach to portfolio construction, particularly at a time when central bank policy continues to be shaped by inflation uncertainty and geopolitical risks.

Performance summary

• The fund returned 0.87% in the first half of the year – ahead of its IA Gilt benchmark which returned 0.18%

• The funds inflation swaps have been a true source of diversification, with the correlation between the UK interest rate allocation and inflation swaps realising at -0.6 and the US interest rate allocation and inflation swaps at -0.5.

• The funds’ ability to dynamically pivot between fixed income and inflation exposure puts it in a good position to navigate further market instability.

Historical performance is not an indication of future performance, and any investments may go down in value. Returns are net of charges. Source: Atlantic House 30 June 2026.

Fixed Income Market Review: First Half of 2026

The first half of 2026 was characterised by significant volatility across global fixed income markets, with investors navigating persistent inflationary pressures, shifting monetary policy expectations and heightened geopolitical tensions. Entering the year, markets anticipated a gradual normalisation of inflation alongside a steady easing cycle from major central banks. Those expectations were repeatedly challenged by resilient price pressures, divergent economic data and a sharp rise in energy prices following the escalation of conflict in the Middle East.

In the United States, inflation remained more persistent than many investors had anticipated. Although core inflation moderated during the early months of the year, strong economic activity, fiscal pressure and trade-related uncertainty complicated the Federal Reserve’s path towards lower interest rates. Consequently, markets repeatedly reassessed both the timing and magnitude of policy easing, resulting in swings in Treasury yields and inflation expectations. The fund’s dynamic framework proved beneficial in this environment. Duration exposure contributed positively during periods when bond markets rallied on expectations of lower rates, while inflation-linked positions provided valuable diversification when inflation expectations rose and the prospect of rate cuts was pushed further into the future.

The UK experienced a similar pattern, albeit with greater sensitivity to energy prices and inflation expectations. Initial signs of moderation in core inflation were overshadowed by the rise in oil and gas prices following the Middle East conflict, reigniting concerns over second-round inflation effects and prompting investors to question the outlook for Bank of England policy. Gilt yields became increasingly volatile as markets balanced a weakening public finance and the risk of renewed inflationary pressures. During these periods, the fund’s inflation-linked exposures helped offset weakness in traditional duration assets, demonstrating the benefits of maintaining diversified sources of return.

The period highlighted the challenges facing fixed income investors in an environment where inflation uncertainty remains elevated and central bank reaction functions continue to evolve. For the fund, the first half reinforced the benefits of a dynamic, rules-based approach capable of adapting to changing market conditions. Duration exposure added value when disinflationary trends supported government bonds, while inflation-linked positions helped protect capital and diversify returns when higher energy prices and geopolitical developments pushed inflation expectations higher. The correlation between the funds inflation-linked positions remains negatively correlated to the funds interest-rate swap positions, allowing the allocation to act as a true diversifier in periods of market stress. This was particularly true in March when oil prices rose in response to the restriction of oil transit through the Strait of Hormuz. The inflation-linked positions added 1.22% from the beginning of the conflict in March to April when peace talks began to progress. In a market increasingly characterised by competing inflation and growth narratives, the flexibility to adjust between duration and inflation protection remained a key driver of portfolio resilience.

Outlook for remainder of 2026

Oil prices are likely to remain elevated relative to levels seen earlier in the year, reflecting both the replenishment of strategic oil reserves and the repricing of geopolitical risk. Consequently, inflation is expected to moderate only gradually, limiting the scope for aggressive monetary easing.

At the same time, growth across the UK and Eurozone continues to soften, presenting policymakers with a difficult balancing act. Weakening economic activity would ordinarily support lower interest rates; however, inflation remains above target and energy-related risks continue to cloud the outlook. This combination increases the likelihood of a prolonged period in which inflation concerns, and growth risks coexist.

Against this backdrop, the fund’s diversified exposure to both duration and inflation-linked assets remain well positioned. Its systematic and dynamic framework enables the portfolio to adapt efficiently to changing macroeconomic conditions, reducing reliance on discretionary decision-making and allowing it to respond to evolving inflation and interest-rate regimes.

We remain focused on:

• The trajectory of oil prices will remain a key driver of inflation expectations throughout the remainder of the year. Any sustained increase in energy prices could reignite inflationary pressures and delay monetary easing. The fund's systematic framework is designed to respond to these changing conditions by dynamically increasing inflation protection while reducing duration exposure when appropriate.

• The durability of a US-Iran agreement and the broader geopolitical backdrop remain important risks for financial markets. Further deterioration to the agreement could prompt a repricing of geopolitical risk, disrupt energy markets and increase volatility across global asset classes.

• The interaction between disinflation, slowing economic growth and strong labour markets will continue to shape the outlook for central bank policy. Policymakers are likely to remain cautious and highly data dependent, increasing the likelihood of a prolonged 'higher-for-longer' interest rate environment and continued volatility across government bond markets.

Owin Bennett, Associate

Key risks

This is a marketing communication. The fund is aimed at advised & discretionary market investors over the long term who have the capacity to tolerate a loss of the entire capital invested or the initial amount. A final investment decision should not be contemplated until the risks are fully considered. A comprehensive list of risk factors is detailed in the Risk Factors Section of the Prospectus and the Supplement of the fund and in the relevant key investor information document (KIID). A copy of the English version of the Supplement, the Prospectus, and any other offering document and the KIID can be viewed at www.atlantichousegroup.com and www.ascenderfundpartners.com. A summary of investor rights associated with an investment in the fund is available in English at www.ascenderfundpartners.com.

Historical performance is not an indication of future performance, and any investments may go down in value.

Counterparty Risk: The risk that a counterparty will not fulfil its payment obligation for a trade, contract or other transaction, on the due date.

Interest Rate Risk: The fund’s investments are sensitive to changes in interest rates.

Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.

Credit Risk: The risk the issuer of the bond fails to make interest or capital payments.

Liquidity Risk: The risk that the fund may be unable to sell an investment readily at its fair market value. In extreme market conditions this can affect the fund’s ability to meet redemption requests upon demand.

Derivatives Risk: The fund is permitted to use certain types of financial derivatives to achieve its objective. The value of these investments can rise and fall depending on the value of the underlying instrument. There is also a risk that the counterparty to these derivatives fails to meet its obligations. For full information on these and other risks, please refer to the fund prospectus and offering documents, including the KID or KIID, as applicable.

Important information

This article is issued by Atlantic House Investments Limited and does not constitute or form part of any offer or invitation to buy or sell shares. It should be read in conjunction with the Fund’s Prospectus, key investor information document (“KIID”) or offering memorandum. Atlantic House Investments Limited is authorised and regulated by the Financial Conduct Authority FRN 931264. Atlantic House Investments Limited is a Private Limited Company registered in England and Wales, registered number 11962808. Registered Office: One Eleven Edmund Street, Birmingham. B3 2HJ.

The contents of this document are based upon sources of information believed to be reliable. Atlantic House Investments Limited has taken reasonable care to ensure the information stated is accurate. However, Atlantic House Investments Limited make no representation, guarantee, or warranty that it is wholly accurate and complete. The information provided in this material is confidential and only for use by its recipient. This material may not be disclosed or referred to any third party or distributed, reproduced, or used for any other purposes without the prior written consent of Atlantic House, any data provider and any other third party whose data is included herein and must be returned on request to Atlantic House and any copies thereof in whatever form destroyed.

The Atlantic House Dynamic Duration Fund is a sub-fund of Atlantic House UCITS ICAV, an umbrella-type open-ended Irish Collective Asset-management Vehicle (“ICAV”) with segregated liability between sub-funds. Atlantic House UCITS ICAV is authorised by the Central Bank of Ireland pursuant to the European Communities Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (the “UCITS Regulations”) as amended, from time to time.

Ascender Fund Partners (Ireland) Limited, trading as Ascender Fund Partners, is a limited Liability company registered under the registered number 579677 under Irish law pursuant to the Companies Act 2014 which is regulated by the Central Bank of Ireland. Its principal office is at Suites 22-26 Morrison Chambers, 32 Nassau Street, Dublin 2, D02 X598 and its registered office is at 7th Floor, Block A, One Park Place, Upper Hatch Street, Dublin 2, D02E762. Ascender Fund Partners acts as management company to Atlantic House UCITS ICAV.