Carmignac Portfolio Long-Short European Equities

• July was the fourth positive month for global equities, but it was much choppier under the surface.• Tech and AI-focused companies reported strong earnings, with standout results from Nvidia or Alphabet. Nvidia crossed the $4 trillion market cap milestone, becoming the first company ever to do so.
• The market reacted positively to delays and reductions in the US proposed tariffs and the overall evolving trade negotiations and tariff developments.
• Hedge funds degrossed, retail investors chased meme stocks, the momentum factor was very volatile, quant funds suffered a large drawdown and US Tech stocks posted strong earnings.
• The degrossing event we encountered in July was the most significant one since March 2020, mostly coming from quant strategies which suffered their 3rd worst month on record.

• In July, the fund posted a negative performance, driven by both our Long and Short books.• Within our Core Longs, our semiconductor positions drove the underperformance, with ASM International and BE Semiconductor reporting weaker orders than expected.
• This weakness was led by a timing issue rather than a structural issue, so we remain very confident in both our investment thesis.
• Throughout the second quarter, we have rebuilt our exposure to the semiconductor space, as we see a continuous surge in demand for AI, cloud computing and data infrastructure, driving unprecedented chip consumption over the near future.
• Prada was also one of our largest detractors as they reported a small miss on sales, which was heavily penalized as investor positioning continued to weigh over fundamentals.
• Prada remains one of the best operational performers within the Luxury space so we are keeping our conviction in the name.
• On the short side, we suffered from the market rally but had strong alpha contribution from some of our largest short positions like Nokia and Novo Nordisk. They both issued a profit warning.

• The net exposure of the strategy stayed relatively high throughout the month in the 30-40% range, as we remain constructive on both the long and short sides. • 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.