Macro/markets

European equity markets continued their upward trend in February: Stoxx 600 +3.3%, EuroStoxx +3.5%. Indexes were buoyed mainly by the multiple truce negotiations in Ukraine, the marked improvement in economic indicators, the German elections, and the publication of annual results. Geopolitics was once again a central theme this month. The end of the Ukrainian conflict could reduce the currently high risk premium on European equities. On the economic front, the preliminary manufacturing PMI rebounded to 47.3 in February. Eurozone inflation rose slightly in January to 2.5% yoy vs. +2.4% in December. The results of the German elections are favorable for the markets, as a two-party coalition between the CDU/CSU and the SPD should rapidly facilitate the formation of a government and the launch of a stimulus plan. On the microeconomic front, annual results are in good shape, with European companies on the whole making encouraging statements about their growth prospects. The outperformance of European indices was accentuated in relation to their American peers, which were down this month: S&P500 -1.4%, Nasdaq -2.8%. US technology stocks suffered from increased competition from Chinese AI models. Donald Trump's announcement of tariffs rekindled the risk of escalating global trade tensions. The US consumer confidence index fell sharply in February, with inflation expectations rising significantly. The Trump administration's initial measures on tariffs and budget cuts, with the dismissal of many civil servants, are raising doubts about US growth. The rebalancing that began at the start of the year could therefore continue over the coming months, to the benefit of the European markets. On the economic front, the German engine is currently the main source of hope. The German coalition is proposing a major stimulus plan, mainly involving increased spending on defense (a theme not invested in the portfolio) and infrastructure. In terms of risks, and despite the recent downturn, inflation (and its impact on monetary policy) should continue to be the focus of attention at the start of the year, as should the US administration's initial decisions.

In February, against a backdrop of growing uncertainty, volatility increased, but the credit market proved resilient. In Europe, spreads tightened and ratings compressed. Investment grade performed +0.6%, while high yield gained +0.9%. In the United States, although spreads widened, performance remained solid due to rate movements: investment grade gained 2%, while high yield advanced by 0.7%.

Technical factors play a key role in this dynamic. Massive inflows were recorded on the European market, with 4.2 billion euros for investment grade and 1.2 billion for high yield. This strong demand enabled companies to refinance at an attractive rate. 81 billion euros were issued on the investment grade market, twice the historical average for the month of February. The high yield market remained quieter, with 5.4 billion euros issued, mainly by banks.

Allowance

Alterosa's December performance was -0.95%, compared with 0.2% for its benchmark.

At the end of the month, the portfolio's equities portfolio comprised 39 stocks, for an exposure of 40.3%. The portfolio's main convictions are thus based around the following stocks: AstraZeneca (Medical Transition, 1.7%), TSMC (Ecological and Lifestyle Transition, 1.7%), Zoetis (Ecological Transition, 1.6%), Schneider Electric (Ecological Transition, 1.5%) and Microsoft (Lifestyle and Economic Transition, 1.5%).

We initiated a eurostoxx 50 hedge position for 3% of the portfolio, bringing net equity exposure to 37.3%.

At the end of February, bond investments represented 54%, a yield in euros of 4.2% and a duration of 3.4.

Equity portfolio

On equities, the main relative outperformers in February were : AstraZeneca (Medical Transition, +10 bps, active weight +1.4%), Knorr-Bremse (Lifestyle Transition, +8 bps, active weight +1.0%), Eli Lilly (Medical Transition, +7 bps, active weight +0.6%), Air Liquide (Ecological and Medical Transition, +7 bps, active weight +1.6%) and Novo Nordisk (Medical Transition, +6 bps, active weight 1.1%). Conversely, the worst relative performers are : Vertiv (Ecological Transition, -21 bps, active weight +0.9%), Synopsys (Economic Transition, -18 bps, active weight +1.3%), TSMC (Ecological Transition and Lifestyle, -17 bps, active weight +1.4%), Prysmian (Ecological Transition, -16 bps, active weight +1.0%) and Thermo Fisher Scientific (Medical Transition, -15 bps, active weight +1.1%).

Among the main moves, we initiated a line in Saint Gobain (Building Materials) and Siemens (Industrials), and strengthened our positions in Vertiv (IT Infrastructure), Microsoft (Software) and RelX (Publishing). These moves were financed by reductions in Palo Alto (Cybersecurity), TSMC (Semiconductors) and Agilent (Healthcare).

Bond portfolio

The Alterosa fund's bond portfolio made a positive contribution to performance over the month. In particular, investments in dollars and sterling contributed to performance. BBB and BB ratings were the best performers.

The sectors that contribute most to performance are healthcare, utilities, capital goods, basic industries and banking. Those that contribute least are media, transport, real estate, telecoms and automotive.

In terms of issuers, the biggest contributors were Graanul (basic industry, ecological transition) after a reassuring conference on its prospects, USD investments in AstraZeneca (healthcare, medical transition) and Takeda (healthcare, medical transition), Perrigo (consumer goods, medical transition) and Smurfit Kappa (capital goods, lifestyle transition). The weakest contributors were Verallia (capital goods, lifestyle transition) after disappointing results, OI European group (capital goods, lifestyle transition), Amplifon (healthcare, medical transition), Getlink (transport, ecological and lifestyle transition) and Rexel (capital goods, ecological transition).

During the month, we participated in two primary issues in the utilities sector: Italgas (ecological transition) and Terna rete Electrica (ecological transition). We cut our investment in OI European Group before the results. Our Enel bond (utilities, green transition) was recalled by the company and we cut our investment in Snam (utilities, green transition). We remain confident about the credit market. In the current uncertain environment, this asset class represents an attractive investment zone offering a solid carry and limited volatility. Inflows could therefore continue in the face of an opportunistic primary market. Corporate earnings are broadly in line, but some sectors (chemicals, automotive) are still lamenting a lack of visibility.