Update on Echiquier Major SRI Growth Europe | December 2024

Adrien Bommelaer, Paul Merle, Marion Cohet-Boucheron, Fund Managers of Echiquier Major SRI Growth Europe, La Financière de l’Échiquier (LFDE)

2024 was marked by a slowdown in the global economy, although not to the point of recession. Central bank monetary policies have become more accommodative as inflationary pressures have eased. The environment remains mixed, with a robust US economy, signs of weakness in Europe and concerns about household consumption in China. Against this backdrop, the Echiquier Major SRI Growth Europe investment strategy, which focuses on high-quality European blue chips, has proved its worth. Since the beginning of 2024, the fund has generated a rising return and outperformed its benchmark.

Operations

Economic outlook

The fund has benefited from a favourable sector allocation, with the overweighting of industrial, tech and healthcare stocks, the underweighting of consumer durables and no exposure to energy. Stock selection has also been positive thanks to the performance of Inditex, Ferrari and Compass in consumer discretionary, and Spotify, the leading music streaming platform, which we added to the portfolio at the beginning of the year.

We expect the global economy to slow moderately in the coming months, with inflation appearing to be firmly on a downward path. In this context, market concerns are shifting from price trends to growth prospects.

To cope with this environment, we continue to maintain a defensive profile, with high exposure to companies with visible, recurring revenues and resilient growth sectors such as healthcare, which are better able to withstand a weaker cycle. We have therefore strengthened our positions on defensive stocks such as Compass, EssilorLuxottica and Wolters Kluwer. Conversely, we have significantly reduced our positions on stocks such as LVMH and L’Oréal in view of the deteriorating environment in China.

FUNDAMENTALS

We also favour companies with low levels of debt that are able to generate cash in a market environment characterised by falling interest rates and inflation that, although declining, is likely to remain higher than before the Covid crisis.

With this in mind, we have initiated a position on SAP. The German group offers good visibility on revenue growth and free cash flow margins thanks to its successful migration to a subscription model. We have also taken a position on Schneider Electric, a quality cyclical whose growth and stellar cash generation are driven by the megatrends of energy efficiency and digitalisation, and its strong exposure to data centres.

INVESTMENT STRATEGY

We are maintaining our conviction-based investment strategy, with a portfolio of around thirty stocks. We continue to apply a rigorous selection process, favouring high-quality growth companies that are leaders in their sectors and therefore have pricing power – the ability to raise prices without undermining demand – allowing them to maintain high margins and avoid cyclical ups and downs.

Under these conditions, the fund should be in a good position to continue to perform well in the current economic climate.

Past performance is not an indication of future performance. The stocks referred to are given by way of example. Neither their presence in the portfolio nor their performance are guaranteed. The opinions expressed in this document are the authors’ own. LFDE shall not be held liable for these opinions in any way. The fund is primarily exposed to the risk of capital loss, equity risk, small and mid-cap investment risk and discretionary management risk.

For more information on the characteristics, risks, and costs of these funds, and before investing, please read the regulatory documents available on our website at www.lfde.com.

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