Carmignac Absolute Return Europe

Weaker US economic data combined with fears surrounding President Trump's impending tariff policy and the potential for an extended trade war catalyzed ongoing selling pressure in US equities that began in mid-February.

Technology stocks were particularly affected, with the Nasdaq falling 8% in March, marking the worst month for global equities since 2023.

European equities were also impacted, falling 3.68% despite a €500 billion defense and infrastructure program by the German government, which many view as a potential catalyst for European growth.

Hedge fund degrossing, which started in February, accelerated in early March, causing a spike in volatility that proved damaging for investors.

In Europe, defensive sectors outperformed cyclicals; Utilities, Insurance, Energy, and Telecoms achieved positive returns, while Travel and Leisure, Consumer Discretionary, Technology, and Healthcare lagged.

March was challenging for the Fund, posting a negative performance due to heightened volatility and significant daily headline risk from the new US administration.

Although individual shorts and hedging produced positive returns, these gains were offset by losses in our long positions.

Long positions in Consumer Discretionary, Industrials, Technology, and Healthcare were the main laggards.

Key stock selection winners included long positions in Euronext, driven by elevated market trading levels, and Piraeus Financial Group, following strong Q4 results, along with short positions in a Luxury and a US Airlines name.

The main laggards from stock selection were long positions in Amazon, due to concerns about slowing growth; Schneider Electric, affected by fears of reduced data center capex; and SAP, amid profit-taking in the Technology sector.

In response to challenging market conditions, our approach is clear and disciplined. Consequently, most of our portfolio activity has been dominated by risk management decisions, reducing gross exposure from 115% to below 100% and net exposure from 20% to 15%.

The world faces unprecedented uncertainty, with the new US administration's tariff-based policies introducing 'Trump mania' into global capital markets, leading to significant headline risk and dramatic daily consequences.

There is a clear risk of an all-out trade war, forcing business leaders and investors to operate with zero visibility. The economic impact of this uncertainty has yet to manifest in economic data and corporate earnings.

The Q1 reporting season is likely to be marked by a loss of confidence in the 2025 earnings outlook.

In these circumstances, our focus remains on capital preservation until the geopolitical volatility subsides, while staying reactive and opportunistic with emerging opportunities in the coming months.