Carmignac Portfolio Long-Short European Equities

European equities experienced a mixed performance in December, closing out a challenging year marked by political instability and economic headwinds.

The November optimism on Trump’s win in the US election subsided, as investors turned towards the impact of potential US trade tariffs and whether the Franco-German engine of the European Union would stall.

In the US, December marked a turbulent end to an otherwise stellar year. US investors engaged in the typical year-end profit taking and expressed concerns on rising interest rates expectations.

Powell’s hawkish cut was an ample reminder that the return of rate hikes would certainly mean lower share prices.

High-performing tech stocks led the negative performance as investors locked in their gains from a strong year.

In December, the fund posted a positive performance, driven by both our Long book and our Short book.

Our Core Longs drove our performance on the Long side, with Prada, SAP and Amazon performing particularly well.

Our Trading Longs had a negative contribution to our performance due to the defensive nature of most of these positions, with stocks like Deutsche Telekom, Aegon or Vonovia trading like bond-proxies.

On the Short side, our Accounting shorts continued to perform well, as well as our defensive short names in the Financials, Materials and Real Estate sectors.

The net exposure of the strategy stayed stable around 30% throughout the month, as we keep strong convictions in defensive names on the Long side.

Our gross exposure has been stable in the 140-150% range.

For 2025, Europe’s domestic productivity woes create some challenges for European companies, but the 50 largest European companies derive only 40% of their revenues in Europe.

Therefore, we expect the European champions within oligopolistic industries, which are dominant global players and best in class operators, to do well in 2025 with the manufacturing re-shoring, AI and defense upgrades among the top key themes.

On the long side of the book, we are keeping a large exposure to defensive names with attractive idiosyncratic catalysts, particularly in the Telecommunications and Healthcare spaces.

On the short side, we continue to find many new names in the Industrials and Technology spaces with poor balance sheets and deteriorating fundamentals, bringing tightened margins and profit warnings.