The Fund's performance was positive in July, but slightly underperformed its reference indicator.
The sector rotation and lower duration explain most of the relative underperformance over the month.
Not having cyclical sectors in the portfolio cost us in relative, but this was offset by our stock selection in the healthcare sector and our exposure to gold.
Our low modified duration did not allow us to take full advantage of the sharp decline in interest rates.
However, the fund benefit from our carry strategies, benefiting from tighter credit spreads.
Our conviction strengthens around a soft landing of global economies, where growth slows without a recession being triggered.
In light of the performance of the first two quarters and the prevailing uncertainties surrounding growth, disinflation, and politics, we have adopted a cautiously optimistic approach and made the decision to partially de-risk the portfolio in comparison to recent months.
We continue to build up protection via option strategies, particularly on volatility, equities, currencies and credit. These strategies enable us to naturally reduce exposure if we enter a correction phase.
Europe | 100.0 % |
Total % Equities | 100.0 % |
We look for performance drivers across asset classes, sectors and countries in Europe with an objective to provide a resilient portfolio, able to quickly adapt to challenging market movements.
Market environment
In Europe, growth surprised to the upside at +0.3% in the second quarter, while inflation picked up slightly. In the US, the economy is slowly paving the way for a soft landing, with job creation and retail sales easing over the month. At the same time, inflation continued to trend lower.
As expected, the Fed left short-term rates unchanged during their July meeting. However, the combination of a less dynamic job growth and lower inflation sets the stage for the Fed to potentially lower rates in September.
In July, political volatility came from the US. Trump survived an assassination attempt, Biden ended his 2024 candidacy, and Harris' nomination boosted Democrats' standing in the polls, hinting at a closely contested election.
Equity market underwent a significant rotation during the month, with small cap and value stocks performing well and outperforming mega cap and growth stocks.
Yield have declined meaning over the month both in Europe and the US, while the yield curve steepens. In the credit market, investment grade (IG) bonds outperformed high yield bonds.