Fund Return 2025 - 2026

Fund return to 28 February 2026

Investment Commentary

Provided by Mercer - CERS Investment Adviser

Market Developments

Global equities had a solid month with ACWI returning 1.3%. In late February, a selloff began in software stocks over the narrative that AI may replace existing technology, but markets stabilized and ended the month slightly lower for the US but with strong positive returns for non-US. Emerging market stocks outperformed both US and non-US developed stocks. The dollar weakened against EM currencies but strengthened against developed currencies. Long-dated rates fell in the US, leading to positive fixed income returns.

A major news item in February was the US supreme court ruling that the IEEPA tariffs imposed on Liberation Day are unconstitutional. These IEEPA tariffs had accounted for nearly half the increase in the effective tariff rate in 2025. In response, the Trump administration announced a 15% tariff on most imports under a different law which will be in effect for the next 150 days. With trade agreements already reached for major regions and new tariffs also expected to be widely challenged in court, options for more trade actions are more limited now than they were a year ago.

US GDP growth for Q4 was 1.4% in Q4, vs. consensus expectations of 2.5% and following Q3 GDP growth of 4.4%. Slower growth was partly attributed to the government shutdown last year. US non-farm payrolls increased by 130k in January, a higher reading than any month in 2025. The unemployment rate fell slightly to 4.3% as a result, with labour participation changing little. Mortgage rates fell below 6% for the first time since 2022, after existing home sales fell 8.4% in January. Fed rate cuts and a falling 30-year yield contributed to this.

Headline inflation in the US fell to 2.4% year-over-year as of January, below expectations of 2.5%. January's headline inflation also decreased in the UK, Eurozone and Japan. The Bank of England and the ECB held rates steady in their February meetings.

The US and Israel launched pre-emptive airstrikes on Iran during the last weekend of the month after markets had closed, resulting in the death of Iranian Supreme leader Ayatollah Ali Khamanei and many other top-echelon members of the regime as well as the destruction of many Iranian military assets. From a financial market perspective, the focus from here will be on whether oil supply is affected. President Donald Trump stated that the strikes are intended to eliminate threats linked to Iran’s nuclear and missile programs and urged Iranians to challenge their leadership. Iran has responded launching missile attacks on Israel and US military assets in the region. Market reactions in early March have been generally muted even though oil saw a more substantial increase, but not nearly as much as during the start of the Ukraine conflict. At around $70 at the publication of this report, oil remains at similar or lower levels than in most of 2024.

Listed real assets, such as global REITs and listed infrastructure, outperformed global equities in February. Commodities were slightly positive due to continued strength in gold and a modest increase in oil. Silver faced deep selloffs.

Outlook

Early on Saturday 28 February 2026, the United States and Israel carried out coordinated military strikes against targets in Iran. Explosions were recorded in multiple Iranian cities with the strikes described as significant in scale. These are significant developments from a geopolitical perspective. From a financial market perspective, the focus will be on whether oil supply is affected and especially whether flows through the Strait of Hormuz – the transit point of c20% of global seaborne oil – are disrupted for a prolonged period. At the time of writing, flows have slowed sharply, although there has not been a formal notification of Hormuz being closed.

If the Strait of Hormuz were to close for a prolonged period there would be a very large increase in oil prices with oil producers unable to get their oil to market. Much higher prices would be required to ensure that demand fell enough to meet the lower supply. While this is the key near term risk, oil prices, which had risen by $10 in 2026 prior to the recent strikes could fall if the situation stabilises.

 Investment Update - February 2026

Notes

• Scheme Year to date performance is the period from 1 June 2025 to the most recent month shown.
• Performance shown is net of annual management charge.
• The investment choices offered by the Trustee will be regularly reviewed and may be varied from time to time.
• Before you choose a fund we recommend that you speak to a financial adviser. 
• If you require further information please contact the CIRT Team at [email protected]