In today’s rapidly evolving market, investors need to stay on top of the latest trends and themes that fuel growth. In this quarterly publication, we offer our market commentary across our themes, covering new opportunities and potential challenges. By providing a deeper understanding of our themes, we aim to help you make more informed investment decisions and achieve your investment goals.

Innovation^{1, 2}

In Q2 2025, innovation-oriented equites rebounded sharply after a volatile April to close the quarter with strong performance. Equities initially sold off due to negative economic growth data for Q1 2025 and adverse trade policy announced by the Trump Administration, but recovered swiftly and meaningfully driven by the administration’s pause and reversal of some of the broad-based reciprocal tariffs; significant improvements in the US inflation outlook and the outlook for US interest rates; the prospect of improved US fiscal policy via the passage of the new tax bill, which should corporate investment and a recovery in sluggish consumer spending; and earnings from AI and tech leaders that exceeded expectations.

Companies focused on digital assets benefited from accelerating product innovation and improving regulatory clarity, while April’s stock price volatility created opportunities for differentiated performance through active management and disciplined stock selection.

Artificial Intelligence And Robotics^{3, 4}

AI and robotics companies were a bright spot in markets despite the chaotic nature of the second quarter. AI infrastructure and software platforms outperformed broader markets, bolstered by rising global demand for compute and sovereign-scale investment, particularly from Saudi Arabia’s $14.9 billion AI initiative. Meta’s formation of Superintelligence Labs and CoreWeave’s post-IPO surge further validated that various parts of the AI stack were in high demand.

The quarter also proved constructive for AI companies aligned with national security and defence priorities. Names in this arena benefited from heightened geopolitical tensions, increased public sector interest in battlefield and intelligence automation, and growing recognition of the strategic imperative to secure domestic AI capabilities. Demand for dual-use technologies (those with both civilian and military applications) continued to rise, positioning national security-linked AI platforms as critical enablers of next-generation defence infrastructure. This dynamic reinforced the broader narrative that AI is not only a commercial growth engine, but also a core pillar of national competitiveness.

Genomic Revolution^{5, 6}

Genomics-oriented stocks rebounded in the second quarter, buoyed by a series of pro-innovation signals from the U.S. Food and Drug Administration (FDA) that helped catalyse renewed investor interest in the space. Key regulatory developments included greater flexibility in the approval pathways for gene and cell therapies, the phased elimination of animal testing requirements for monoclonal antibody trials, and the appointment of new leadership at the agency with a mandate to modernize and accelerate data-driven oversight. These shifts underscored a growing institutional willingness to embrace technological advancement and streamline the development pipeline for breakthrough therapies.

Leaders in the genomics space, particularly those at the intersection of biotechnology and artificial intelligence—were among the primary beneficiaries. Companies leveraging AI to enhance target discovery, optimise trial design, or personalise therapeutic delivery stood out as emblematic of the next generation of disruptive healthcare platforms. While some clinical-stage firms remained vulnerable to episodic volatility due to binary trial outcomes or funding concerns, the broader sector benefited from a constructive re-rating as sentiment improved and the policy backdrop turned more innovation-friendly. As a result, the genomics segment is increasingly viewed not only as a long-duration growth story, but also as a near-term beneficiary of regulatory tailwinds and technological convergence.

Cybersecurity And Data Privacy^{7, 8}

Cybersecurity stocks are enjoying stellar returns this year, notably outperforming major market indices like the S&P 500 and Nasdaq 100. A series of high-profile cyber incidents in Q2 2025 have highlighted the vital importance of investing in this sector, driving investors to buy up cybersecurity stocks.

In Europe, a massive cyber-attack on UK retailer Marks & Spencer grabbed headlines and left shelves unstocked, as hacking group “DragonForce” rampaged through the retail sector—also hitting names like Harrods and the Co-op with aggressive attacks. Even supply chains were targeted as a breach at supplier Peter Green Chilled impacted multiple supermarket chains.

Crypto exchange Coinbase revealed a brazen ransomware plot in which insiders were bribed to assist hackers; the CEO’s response was to refuse the ransom and offer a $20 million bounty to identify the perpetrators. These events came as SentinelOne reported a surge in attack frequency— global cyber attacks jumped ~30% year-over-year, as of mid-2024—and the emergence of AI-enhanced threats, reinforcing that organisations must bolster their defences continually.

For investors, the quarter’s news highlighted cybersecurity as a non-discretionary expenditure. Rising threats and regulatory pressures are driving sustained demand for security solutions and services to protect critical assets. An exposure to this theme that priorities pureplay cybersecurity companies should capture the growth of the sector with minimal overlap to other tech themes and big tech companies.

Circular Economy^{9, 10, 11, 12}

Q2 2025 saw meaningful moves toward a more circular economy, from corporate innovation to government regulation. On the industry side, battery recycling leader Redwood Materials launched a new division in June to repurpose retired electric vehicle batteries into modular energy storage units, which the company says cost substantially less than new batteries. Rather than fully breaking down every used battery for raw materials, Redwood’s approach gives second life to batteries that still have around 50 percent capacity, turning them into low-cost, large-scale storage systems for the grid. This not only reduces waste but also helps meet booming demand for energy storage with recycled inputs.

In the policy arena, the EU took a major step by approving stricter end-of-life vehicle regulations. In mid- June, European ministers adopted a position requiring auto manufacturers to design new vehicles for easier reuse and recycling; they also introduced binding targets for recycled material content—at least 15 percent of recycled plastic in cars within six years of implementation, for example. These developments highlight growing momentum behind circular economy principles.

For investors, the takeaway is that companies innovating in recycling, reuse, and materials efficiency are increasingly positioned to benefit not only from cost savings but also from favourable policies that demand more sustainable product lifecycles. It is not just environmental drivers that support this theme; it is also the economic ones.

Environmental Impact^{13, 14, 15}

Independent energy think tank Ember released its “Global Electricity Review 2025” report in April, illustrating that in 2024 clean energy (renewables plus nuclear) provided 40.9% of the world’s electricity. It is the first time clean energy has surpassed the 40% threshold in the modern era, with solar power alone expanding by 29% and doubling its output over the past three years. The momentum has been buoyed by the rapid electrification of transport. Despite negative news flow surrounding electric vehicles (“EVs”), global sales are set to reach new highs this year, with 1.6 million EVs sold in May and 7.2 million year-to-date (a 28% increase over the same period in 2024).

At the same time, innovation has advanced the frontier of clean technology and continued to drive cost curve declines, which are essential for widespread adoption. For example, researchers achieved a 26.4% efficiency milestone with a flexible tandem solar cell published in Nature in June, pointing to future cost and performance gains in photovoltaics.

All these developments strengthen the investment case for environmental solutions worldwide: clean power and transport are scaling exponentially, and industry experts project that growth in renewable generation will eventually outpace AI-fuelled demand growth, potentially catalysing the longer-term structural decline in fossil fuel use.

Global Sustainable Infrastructure¹⁶

Sustainable Infrastructure has continued its remarkable run this year, offering investors a defensive and stable economic growth profile that has performed well in a challenging market environment. The asset class, which invests in listed infrastructure operators, is not only outperforming the MSCI World index but also doing so with materially lower volatility.

Q2 2025 reinforced sustainable infrastructure as a resilient and attractive theme with some notable developments in private assets. Investors poured M&A capital into clean energy projects and related projects at record levels, renewable energy accounting for roughly one-third of global infrastructure deal volume in early 2025. A notable transaction was the $1.74 billion acquisition of National Grid’s U.S. renewable portfolio (solar, wind, battery storage), highlighting confidence in long-term returns from green assets. Even as broader M&A activity slowed, new project development surged and fully offset the decline. From grid expansions to utility-scale batteries and EV charging networks, greenfield investment in infrastructure aligned with the energy transition is accelerating.

While these trends reinforce sustainable infrastructure as a defensive growth play, it remains essential for investors to be selective in their exposure. Assessing the financial robustness of companies is particularly critical in infrastructure, where long-term capital commitments, high up-front costs, and extended payback periods can expose weaker balance sheets. The quarter’s developments—strong deal flow, continued policy support across multiple regions, and the pressing need to modernise energy, transport, and digital systems—all strengthen the case for sustainable infrastructure, particularly in a smart-indexed exposure that assesses financial strength, as a long-term growth opportunity with durable, secular demand drivers.

Sustainable Future Of Food^{17, 18, 19, 20, 21}

The second quarter of 2025 saw encouraging developments for sustainable food technologies, even as the sector recalibrated after recent volatility. In Europe, innovation and investment continued: Finnish startup Volare secured €26 million to build an insect protein plant, which will convert food waste into animal feed protein; and BlueNalu, the cultivated seafood pioneer, expanded its partnership with Nomad Foods (Birds Eye’s parent) to bring cell-based fish to the UK market.

Regulatory support also advanced, with the UK’s Food Standards Agency launching a £1.4 million precision fermentation hub to help novel protein companies navigate approvals. While overall funding in alternative proteins has cooled from its 2021 peak—Q1 2025 investment was down ~28% year-over-year amid investor caution—the quarter’s highlights, including major financing for fermentation platforms like Formo’s €35 million European Investment Bank loan, point to a more positive longer-term outlook. Companies focusing on efficient, scalable protein alternatives are making tangible progress in cutting resource use and emissions, reinforcing the investment case for sustainable food as the world seeks climate-friendly ways to feed a growing population.

USA Environmental Impact^{22, 23}

While recent headlines have focused on challenges facing the U.S. clean energy industry, there is growing momentum beneath the surface. Consider some of these facts:

• During the first four months of 2025, wind and solar together produced over 20% of U.S. electricity.
• In April, the total share of renewables (including hydro and others) climbed to a record 32.8% of generation, nearly matching natural gas at 35.1%!
• 8 GW of new solar capacity was installed during Q1—solar plus battery storage made up 82% of all new power additions—and an additional 8.6 GW of domestic module manufacturing capacity came online in one of the biggest quarterly expansions ever.

For some time now, significant policy uncertainty has followed the dismantling of the Inflation Reduction Act, which catalysed growth in environmental technologies during the Biden administration, as well as warnings from the industry that the removal of subsidies and tax credits would “halt America’s manufacturing boom’. Yet, it appears the new administration has taken a pragmatic approach in signing the One Big Beautiful Bill Act into law on July 4.