Carmignac Absolute Return Europe

• July was a positive month for European equities, with the Stoxx 600 returning +1.38%, driven by macro factors and the Q2 earnings season which began mid-month.• US equities outperformed Europe, supported by a stronger macro backdrop, mega-cap tech strength, and a higher proportion of earnings beats.
• Within Europe, cyclicals outperformed defensives, Value outperformed Growth, and Large Cap outperformed Small Cap.
• The Q2 earnings season has been volatile, with some of the most extreme single-day stock moves in the past decade.
• Signs of earnings fatigue and concerns over H2 outlook—due to softer macro data, FX headwinds, and tariff risks—set a high bar for positive earnings reactions. In the absence of upgraded Q3 guidance, stocks saw significant sell-offs.
• Single-stock short positions were aggressively squeezed as investors reduced risk heading into the summer lull.
• The best-performing sector in Europe was banks, once again showing resilience to tariffs and delivering strong quarterly results.

• In a volatile month punctuated by extreme reactions to earnings reports the fund produced a negative return.• Although we achieved a positive return from our long book, this was more than offset by losses from individual stock short squeezes and our portfolio hedging program.
• At the sector level, positive returns came from Financials and Industrials, while key detractors were Technology, Healthcare, Consumer stocks, and Real Estate.
• Key stock selection contributors included long positions in Prysmian, which gained on an earnings beat; Piraeus Financial, supported by strong Q2 results and a share buyback; and Nvidia, which benefited from increased capex projections by hyperscalers.
• Stock selection detractors included a long position in ASM International, which declined following disappointing Q3 guidance; Novo Nordisk, which sold off after a significant downgrade to full-year earnings; and a short position in a French luxury stock.

• With the Q2 reporting season in full swing, portfolio activity focused on adjusting positions around earnings announcements.• We modestly reduced Technology exposure, particularly in analogue semiconductors, where recovery remains slow.
• We took profits in Materials, covered shorts in Industrials, and added Financials via Société Générale and Alpha Bank, where we see upside to earnings forecasts.
• Fund exposure ranged between 120–130% gross and low-to-mid 20s net.
• As Q2 earnings season winds down and August volumes soften, market focus is shifting from micro (corporate results) to macro.
• Elevated valuations and tariff uncertainty warrant caution, but potential Fed leadership change and rate cut expectations may support pro-cyclical sectors.
• Our highest conviction remains in Banks, offering both cyclical upside and utility-like stability—no tariff exposure, consistent earnings growth, and capital return.
• Pharma has been the main drag this year, but we believe its 2.5 years of underperformance may be nearing an end.
• Clarity on Trump’s "most favored nation" pricing and industry tariffs could be the key catalyst.