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In a volatile market environment, the Fund posted a positive absolute performance, outperforming its benchmark over the month.
Regarding rates, despite an unfavorable rate environment during the month, our short positions in French debt made a slightly positive contribution.
In credit, the portfolio benefited from its carry strategies, with a particularly strong positive contribution from our energy and financial sector bonds, especially subordinated securities.
Finally, the portfolio continues to benefit from our exposure to money market instruments and, to a lesser extent this month, from our selection of collateralized loan obligations (CLOs).
In a context marked by increased risks of economic slowdown related to higher tariffs, the market currently deems proactive action by the ECB unlikely, making short-term swaps attractive due to their positive carry. The portfolio's duration was gradually increased, rising from 1.7 to 2.4 during the month, by strengthening exposure to the short end of the European yield curve.
On the one hand, the portfolio benefits from a significant allocation to credit, mainly invested in short-term, well-rated corporate bonds and CLOs, which offer an attractive source of carry and reduced beta relative to market volatility.We are taking a cautious stance on rates, particularly in Europe, where we favour a strategy of steepening the yield curve and using options to protect against a potential rise in rates.
We are taking a cautious stance on rates, particularly in Europe, where we favour a strategy of steepening the yield curve and using options to protect against a potential rise in rates. We are maintaining exposure to inflation break-even strategies in the United States, as we believe that the risk of rising inflation is underestimated, particularly to protect the short end of the portfolio.
We are also maintaining credit market protection (iTraxx Xover), as markets are trading at tight levels amid economic and trade uncertainty.
Finally, we keep part of the portfolio in money market instruments, which help control the overall volatility of the portfolio while providing a cash reserve to be redeployed in case of a market event.
Bonds | 80.1 % |
Money Market | 17.2 % |
Cash, Cash Equivalents and Derivatives Operations | 2.8 % |
For over 35 years, we have maintained our active and conviction-driven approach, while being able to adapt to different market configurations. This is what we want to continue offering to investors.
Market environment
• At the same time, the US Federal Reserve kept its rates unchanged at 4.25–4.50% for the fifth consecutive meeting, reaffirming its cautious “wait-and-see” stance and showing no urgency to proceed with further rate cuts.
• The European Central Bank paused its easing cycle after eight consecutive rate cuts, keeping the deposit rate at 2.0%. The growth outlook for the eurozone rose to an 11-month high, with leading PMI indicators in expansionary territory.
• Rates rose in July on the back of resilient growth prospects on both sides of the Atlantic. The US 10-year rate rose by +15 bp and its German counterpart by +9 bp.