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The net exposure of the strategy stayed relatively low throughout the month in the 10-20% range, as we reduced some of our exposure on the Tech side.
We keep strong convictions on the Long side in European companies excelling globally and benefiting from local monopolies.
These include industries such as luxury goods, specialty engineering, ERP software, specialty chemicals, medical technology, aerospace and defense, and classifieds.
We believe Europe presents for the first time in a long time a very attractive entry point, with a risk/reward skewed to the upside thanks to several factors we discuss in our latest quarterly letter.
Germany has removed the fiscal drag which has weighted on Europe for more than a decade and the upcoming defense and infrastructure historic investment plan will have a profound impact on the overall region.
On the short side, we continue to find many new names in the Consumer and Industrials spaces with poor balance sheets and deteriorating fundamentals, bringing tightened margins and profit warnings.
Europe EUR | 33.5 % |
North America | 13.0 % |
Others | 10.0 % |
Europe ex-EUR | -4.2 % |
Index Derivatives | -34.6 % |
We strive to build a high-conviction portfolio of long and short positions, based on a thorough fundamental company analysis to identify the best opportunities in Europe.
Market environment
• The Tech sector experienced a relative underperformance following growing skepticism around the secular AI theme’s fundamentals, given the rich valuations and elevated positioning.
• In the Long/Short Equity space, European funds struggled with one of the worst alpha months since January 2022 driven by losses from concentrated longs, utilities and the French political instability.