DNCA Invest Eurose

Another month marked by geopolitical tensions, offering no prospect of relief on energy prices. In this environment, where economic activity remains resilient and inflationary pressures persist, monetary policy expectations are tightening and interest rates are rising. The rise in yields is accompanied by particular pressure on French debt: the upward revision of the public deficit trajectory and uncertainties surrounding the fiscal effort planned for 2027 pushed the OAT-Bund spread to 2012 highs of 127 basis points at the end of the month. The movement in rates did not leave risky assets unscathed; however, the resilience of the economic environment and the rebound in the technology sector allowed equity markets and credit spreads to limit their declines. Credit spreads widened by 16 basis points in the investment-grade segment and by 61 basis points in the high-yield segment, a level close to the annual highs reached in late March. Sector-specific divergence widened over the course of the month, with the automotive sector suffering particularly hard—especially following Volkswagen’s profit warning—while real estate stocks were penalized by their sensitivity to interest rates. The EURO STOXX 50 NR posted a return of -2.2% for the month and +10.3% year-to-date. Investment-grade credit fell 1.30% for the month and is down 1.20% year-to-date, while high-yield credit lost 1.79% for the month but remains up 0.18% year-to-date.

DNCA Invest Eurose fell by -1.73% over the month, bringing its year-to-date performance to 0.64%.

Despite the rebound in the technology sector, the contribution from equities was negative for the month, driven in particular by the decline in the building materials sector (Saint-Gobain and Wienerberger) as well as underperformance of more than -10% for Ayvens, CSG, Nemetschek, and Orange. During the month, the fund initiated two new positions in Heijmans (a Dutch construction and engineering group) and the Italian bank UniCredit. The fund also increased its holdings in Delivery Hero (the subject of a proposed takeover by Uber) and Soitec. Conversely, the fund reduced its holdings in the French stocks Ayvens, Bouygues, Orange, Publicis, Société Générale, and TotalEnergies. At the end of September, the fund’s net equity exposure stood at 23.5% (excluding carry).

We are active in the primary convertible bond market (Accor & Soitec), bringing our exposure to nearly 5%.

Within the bond portfolio, we hold several attractive issues (SoftBank, Avolta, La Banque Postale, Lagardère, Volkswagen Bank, Hella, Derichebourg, SPIE, RCI Banque). In the secondary market, opportunities remain scarce; we favor subordinated bonds with short call periods from high-quality issuers, such as Crédit Agricole. We are also extending some maturities to take advantage of the yield curve (Grünenthal, ING, Traton). To offset these purchases, we are taking profits on bonds that no longer offer potential for further tightening (CA Auto Bank, Jyske Bank, Teva, Ayvens, Imerys, Elis). Despite the widening of spreads during the month, the hedging position for high-yield credit risk is maintained at 1% of the portfolio. In the current environment, we are avoiding any exposure to French debt.

The portfolio’s duration has increased by 0.15 to 4.75, in order to capitalize on the rise in interest rates.

The portfolio’s non-financial characteristics show a responsibility score of 4.9 and an exposure to the sustainable transition of 82.51%.

In this environment, which remains as uncertain as ever, we are maintaining a balanced allocation and a measured exposure to interest rate risk, while preserving significant flexibility to capitalize on potential opportunities should volatility resurface. Thanks to rising market rates and our active management, the bond portfolio’s yield—nearly 4.5%—has returned to historically high levels.