LO Funds
Europe High Conviction

EUROPEAN MARKET REVIEW AND FUND PERFORMANCE

The European equity market returned 3.6% in February (MSCI Europe TR) and Small and Mid-Cap stocks measured by the MSCI Europe SMID returned 1.7%.

European shares advanced in February benefiting from incoming flows, investors being increasingly worried about President Donald Trump’s tariffs effects on the US economy. Those concerns were compounded by weak leading indicators. In Germany, the election of Friedrich Merz, Christian Democrats (CDU), was well received by the equity markets as it could lead to the end of the German fiscal orthodoxy. The month was also very rich on the geopolitics side: the US made it clear that it would not accept to finance NATO at the same level as before and that European countries had to shoulder their defense burden, leading to a surge in European defense names.

In that context, the top performers in the MSCI Europe were Leonardo, Societe Generale and Banco Santander. while Capgemini, BE semiconductor and Sartorius Stedim were the worst performers.

By sectors, Finance and Communication Services performed the best, up +8.1% and +5.6% respectively while Information technology and Real estate were the worst performers, down 2.7% and 0.1% respectively.

The Fund returned +1,8% in February (NA share class) versus 3.6% for its benchmark.

In February, our top three positions minus our bottom three positions had a net -9 bps impact.

STOCK PERFORMANCE: TOP CONTRIBUTORS AND DETRACTORS

CONTRIBUTORS

The top three contributors to the Fund’s performance in February were Prudential, VusionGroup and Deutsche Bank.

Prudential: Prudential is a leading life insurance and asset management company with a peerless franchise in Asia (ex-Japan). The stock was up 8.6% (EUR) in February following the announcement that the company was considering a listing of its Indian investment management joint venture with ICICI.

VusionGroup: is the worldwide leader in smart digital labels and pricing automation and has developed a comprehensive IoT and digital platform that delivers a complete set of services to retailers. The company reported strong FY results confirming its 2027 ambitions. The stock was up 23.9% in February.

Deutsche Bank: Deutsche Bank provides retail and private banking, corporate banking, lending, asset and wealth management products and services as well as focused investment banking. Deutsche Bank is the leading bank in Germany. The stock was up 9.4% in February after good results reported end of January with capital distribution goal reaffirmed.

DETRACTORS

The three positions that detracted most from the Fund’s performance in February were Spirax, SIG and Interpump.

Spirax Group: Spirax Group provides mission critical thermal energy and fluid technology solutions to customers in a diverse range of industrial sectors. The stock was down 9% in February after some downgrades from sell-side analysts.

SIG: SIG is one of the leaders in aseptic packaging solutions. The stock was down 9.4% in February after the company reported FY 2024 results and 2025 guidance, with limited visibility regarding end market recovery.

Interpump: Interpump is an industrial company specialized in water pumps and hydraulic systems. After reporting FY 2024 results showing no improvement on the hydraulic division in Q4 and a very cautious guidance for 2025 below what the consensus was expecting, the stock was down 20.3% in February.