Aoifinn Devitt, Independent Investment Adviser, presented the Market Commentary Report for members to consider and note.

Members sought assurance on the AI bubble and how damaging it could be.

Aoifinn Devitt responded that initially she expects there to be a stock market shock and a sell off, which will make our portfolio more volatile so we will need headroom for this exposure. Following this the market will realign, with some companies dropping out and others emerging stronger, though most firms are likely to survive. Noting that throughout this equity market wobble, the demand for data centres should remain strong.

Members noted that UK stock markets have performed well since the Budget, largely because the measures were broad based rather than focused on specific sectors as seen in the US and asked what factors could prevent this momentum from continuing throughout the remainder of this Parliament, and is this trend attracting the attention of Border to Coast in shaping its investment strategy for the UK.

Aoifinn Devitt replied that the market held up after the Budget due to the FTSE’s foreign currency exposure and its focus on energy, industrials and financials, which have all performed well. Noting that the UK market is tiny globally, which is why pension funds have reduced UK allocations. While forced UK investment isn’t favoured, there is a push to make the UK more attractive on its own merits, with good relative value and efforts to stimulate areas like energy and local investment, where Border to Coast is already active.

Independent Investment Adviser, Jonathan Hunt added that UK markets are often misunderstood. Pension funds have reduced UK exposure because the index is dominated by stable, dividend paying companies rather than high growth stocks, pushing investors toward the US. This raises the wider question of how to make London a growth market again, but the UK lacks the same supporting infrastructure as the US. Further to this, gilt markets have stabilised, improving confidence.

Members further probed around the AI bubble and its potential impact, questioning whether it is being driven by private debt and private credit, and could problems there spill over into our own exposure.

Aoifinn Devitt responded that AI isn’t the main issue, and while private credit has risks, they’re mostly in the mid?market where lenders back operating companies with steady cash flow. AI investment is largely funded by big firms themselves, so any downturn would hit equities first.

Members queried whether emerging markets in Africa is way off the mark when compared to other markets such as China.

Aoifinn Devitt responded that China continues to invest in regions others avoid, including parts of Africa, but as an investment opportunity, Africa remains firmly in frontier market territory. Investors have pulled back from emerging markets in recent years due to weak returns, and African managers face challenges such as limited liquidity, weaker tech infrastructure, and political or legal instability. Because of this, it’s unlikely we would see an African Allocation in the Border to Coast emerging fund at this stage, though it’s not impossible in the future.

Jonathan Hunt further added that Africa is a big continent but in terms of its liquidity and debt, it is dwarfed by other areas.

RESOLVED: Members noted the report.