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DNCA Evolutif PEA
Flexible
Art.8
Equity markets rebounded sharply in May, buoyed by stronger economic data and an easing of trade tensions. Tariffs between China and the USA were reduced from 125% to 10% for American goods imported into China and from 30% for Chinese goods imported into the USA, but the climate remains volatile. The eurozone's relative macroeconomic stability, combined with a cautious monetary policy, makes Europe a good alternative to stressed US markets.

The Stoxx 600 rose by 4.02%, buoyed by a season of better-than-expected quarterly results, with all sector indices ending the month up. Cyclical sectors in particular lifted the index, with Travel & Leisure (+10.76%), Industrials (+8.6%) and Banks (+8.17%). Some stocks did particularly well, notably in the defense sector. RENK stood out with a monthly increase of +48.2%, underpinned by strong sales momentum and a significant improvement in profitability.

Overall, the environment remains volatile, but the return of a "soft landing" scenario is supporting risky assets. We have increased our exposure to equities* to 79.7% compared to the end of April.

Our positive contributors include ASML, SAP and Schneider Electric, buoyed by the easing of trade tensions between China and the USA. In particular, ASML held an information meeting during which the tone was cautiously positive. Geopolitical uncertainty and tariffs remain a concern, but the annual outlook has so far been more stable than expected. TSMC, Samsung and Intel continue to invest in 2 nm. AI, 2nm logic and HBM memory remain key growth drivers. SAP also held its annual conference for financial analysts this month. The main positive messages were: (1) higher medium-term sales targets, with management stressing that total sales growth could be in the order of 10% over the long term (compared with our forecast of 13%), thanks to cross-sell and up-sell and an increase in the number of new customers ; (2) the aim is to be a "rule of 40" company in the long term, which, assuming 15% sales growth, implies that FCF margins can rise from 21% in 2025 to over 25%; and (3) margin expansion will be driven by the internal use of AI agents in sales and marketing, R&D and G&A, with a target for total spend growth of 80-90% of sales growth. Schneider Electric, meanwhile, reported solid organic growth of +7.4%, driven by growth in orders in Datacenters and 'Industrie Manufacturière. The Group reiterated its full-year guidance, with the second half better than the first.

Our three main detractors are Sanofi (mixed clinical trial results for its experimental drug Itepekimab), Munichre (following disappointing Q1 results, mainly due to high Los Angeles wildfire claims and lower renewal prices) and Stellantis. We have also reduced our position in Sanofi in view of the uncertainties associated with the tariffs that may be imposed on the pharmaceutical sector in the United States.

*Equity exposure: the level of exposure is rebased in relation to total portfolio exposure.
Footnotes

*The inception date of the Fund is 2006-08-03