DNCA Invest Archer Mid-Cap Europe

The fund invests in the attractive European mid-cap segment.

We aim to find the best value for money: In other words, to hold companies with excellent fundamentals and solid prospects while maintaining a rigorous approach to valuation.

Economic Overview

The MSCI Europe Mid Cap Index closed September down 2.2%, in an environment marked by the return of inflationary pressures and a broad-based rise in sovereign bond yields. In the United States, the Federal Reserve raised its benchmark interest rate by 25 basis points, adopting a resolutely hawkish stance in response to a still-strong economy, persistent inflation, and oil prices remaining at high levels amid the conflict in the Middle East. In Europe, the ECB also continued its monetary tightening, while the rise in long-term rates was accompanied by a marked widening of the spread between France and Germany. Despite continued favorable earnings growth and ongoing investments in artificial intelligence, European equity markets were weighed down by higher discount rates and concerns about future growth.

Within the index, Energy (+4.6%) posted the best performance, benefiting from persistently high oil prices. Health Care (+1.2%) also held up well, while Utilities (-1.1%) and Industrials (-1.9%) limited their declines. Conversely, Real Estate (-6.0%) and Communication Services (-5.9%) posted the sharpest declines, followed by Consumer Discretionary (-4.5%) and Materials (-3.9%). Information Technology (-3.2%), Consumer Staples (-3.3%), and Financials (-2.1%) also declined amid rising risk aversion.

Explanation of Performance

The portfolio's monthly return was -2.37%, representing a -13 bps outperformance relative to the benchmark index.

The top contributors were: Irish Continental (+10.9%), which benefited from shareholder approval of the buyback offer at 8 euros per share; Cenergy Holdings (+5.4%), supported by a record order backlog and strong investment momentum in power grids and interconnections; Hill & Smith (+11.1%), driven by demand for power infrastructure and data centers in the United States as well as the continuation of its share buyback program; Alpha Bank (+6.3%), supported by strong credit growth, continued improvement in the quality of its balance sheet, and ongoing share buybacks; and Corbion (+12.5%), which is benefiting from improved sales momentum and margins, with a more favorable outlook for the second half of the year.

The biggest underperformers were: flatexDEGIRO (-23.9%), weighed down by governance uncertainties following the sudden departure of the chairman of the supervisory board and a major management shakeup; Glanbia (-11.3%), affected by persistent concerns over the cost of whey and the pressure this environment could exert on the margins of its nutrition business; Renk (-19.8%), affected by questions regarding the timeline for major orders of armored vehicles and reduced visibility on the potential for short-term earnings growth; Rosebank (-10.0%), on which we took profits; and Intea Fastigheter (-11.0%), weighed down by rising interest rates and sector allocation.