Carmignac Absolute Return Europe

October saw significant market volatility with stock leadership dominated by macro factors which is unusual in a month with a heavy reporting schedule.

Sentiment was undermined by political uncertainty and rising bond yields most notably in the US which rose from 3.75% to 4.28% in a matter of weeks, and in the UK where yields spiked after a poorly received UK budget.

This toxic combination drove aggressive rotation and a sell off into the end of the month leaving European equities -3% for the month, making October the worst monthly return of the year.

Within Europe the only positive sectors were Banks, Travel & Leisure, telecoms and Energy, every other sector was down on the month.

October was a frustrating month as the fund return was positive for the month, up until the very last day, when the market sold off due to a combination of macro driven and sector rotation pushing the fund into a small loss.

Our short book and derivatives hedging overlay produced a positive return, but this was modestly offset by losses in our long book.

Within the portfolio the most positive sector returns came from Financials and Communications while the main detractors came from Technology, Consumer Discretionary and Real Estate

• Key winners from our stock selection included our long position in Standard Chartered, which saw an earnings beat driven by strong performance in Asian wealth management, and our long position in Deutsche Telekom, which benefited from a positive capital markets day.

Other notable winners were our long position in SAP, which performed well after reporting strong numbers that highlighted accelerating growth, and our short position in a German IT services company, which posted a profit warning due to deteriorating demand.

The biggest laggards from our stock selection were our long position in ASML, which reported weak orders and provided lower guidance for 2025, and our long position in First Solar, which reported earnings below forecast.

Overall sector adjustments were modest but at the stock level we added to Financials, Communications and cyclical names in Industrials and Consumer Discretionary through a combination of short covering and additions to longs.

We continued to run a relatively low gross of around 105% while net was maintained within a range of 15% -mid 20S%.

Over the last 5 months, global equity markets have been at the ‘mercy’ of unusual and highly unpredictable macro & political forces.

Some events have been extremely hard to negotiate, causing big moves and fast sector rotations. A tough environment to be a bottom-up stock picker.

So, we now embrace the next months ahead. We believe stock picking, thematic investing, that actually works with longer than just days or at best weeks durations, should make it less difficult both for our Long & Short book.

Meanwhile, our views and sector selection remains largely unchanged, with a barbell approach, balance between Growth and Value.