Focus on... Echiquier World Equity Growth | January 2025
David Ross, CFA, and Louis Bersin, CFA, Managers of the Echiquier World Equity Growth Fund, La Financière de l’Échiquier (LFDE).
Equity markets continued to soar in 2024. The U.S. economy proved much more robust than expected, supported by an overall fiscal deficit projected to stand between 6.4 and 7% of GDP in 2024. The S&P 500 index, representative of the U.S. equity market, has risen more than 20% for the second year in a row – an achievement not seen since 1997-1998. On the monetary policy front, after several years of restrictive policy, the U.S. Federal Reserve decided to ease its strategy and lowered its rates. Eighteen of the world’s 25 main central banks made a similar choice in 2024. This positive environment enabled Echiquier World Equity Growth to continue to rise during the year. Total assets under management in the fund, LFDE’s quintessential conviction-driven strategy, now exceed 1.2 billion euros.
PORTFOLIO ACTIVITY
Economic outlook
After a slight setback during the summer, large cap growth stocks – to which Echiquier World Equity Growth is heavily exposed – resumed their upward trajectory for the remainder of the year. In this environment, U.S. stocks Amazon, Nvidia and Visa were the fund’s leading contributors to performance in the second half, supported by their robust quarterly earnings. Investors took some profits on technology stocks and Oracle was removed from the portfolio in the middle of the year. The fund’s exposure to financials, principally to payment networks, was dialled back up as inflation cooled and even turned resilient in the United States. Finally, the fund sold its position in Banorte, the Mexican bank, in a move to lower its exposure to Mexico as President Trump seems determined to impose new tariffs on neighbouring countries.
FUNDAMENTALS
Uber, the leading ride-hailing and meal delivery app, was added to the portfolio. Following two-digit growth and cost-cutting efforts, the company has seen its profitability improve substantially over the past 3 years. We expect this trend to continue as Uber’s services are increasingly adopted, with generative AI used to provide better automated client service. This investment opportunity arose following D. Trump’s election, considering his ties with Elon Musk who aims to launch a self-driving robotaxi service. While Tesla is clearly making serious headway in the full self-driving (FSD) market, the adoption of this technology is likely to remain gradual and other players will emerge. Uber relies on over a dozen partnerships in this area, including exclusive agreements with several cities in the U.S. through Waymo, a subsidiary of Alphabet.
INVESTMENT STRATEGY
The Echiquier World Equity Growth fund, which includes our strongest convictions, remains focused on around twenty international large caps. The team firmly believes that its best ideas also offer the best long-term investment opportunities. Consequently, the fund’s top 10 holdings weigh over 60% of its net assets. These companies are selected for their quality fundamentals and resilient growth and are also exposed to robust long-term mega-trends. The fund has maintained its cautious view on the economic cycle and invests principally in secular growth or defensive stocks.