The Investment Letter - August 2026

Equity Market

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After a July marked by significant market rotation—which nonetheless did not derail the stock indices from their upward trajectory—August turned out to be a calmer month. Stock indices rose slightly in Europe (MSCI Europe NR +0.5%) and more significantly in the U.S. (MSCI USA NR +2.7%). Rising geopolitical tensions, a sharp rise in long-term interest rates to levels not seen since the 2008 financial crisis, a shift toward a more hawkish tone from central bankers, and high valuations—nothing seems to be dampening the indices’ upward momentum at this stage.

Against this backdrop, the Technology, Banking, and Basic Resources sectors stood out on both sides of the Atlantic. The Technology sector was lifted by a rebound following a difficult July, as well as strong quarterly earnings reports. The Basic Resources sector benefited from renewed geopolitical tensions and the resulting rise in commodity prices, which was also fuelled by growing demand from chip manufacturers. Finally, banks are gaining ground due to the marked steepening of the yield curve.

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Fixed Income Market

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August was characterized by divergent signals across asset classes, against a backdrop of geopolitical tensions, evolving monetary policy expectations and resilient risk appetite. Global equity markets advanced, with the S&P 500 rising 2.6% to 7,686 points, while the MSCI World gained 2.5% to 4,968 points. The performance was notably supported by continued strength in semiconductor stocks.

Bond markets remained under pressure throughout the month. The yield on the 10-year US Treasury rose slightly to 4.75%, amid the Federal Reserve maintaining a restrictive stance. At the Jackson Hole conference, Fed Chair Kevin Warsh notably highlighted the persistence of inflationary pressures. Global bond yields consequently moved closer to their highest levels in several decades, while Japanese JGB yields approached the 3% threshold.

Among commodities, gold was the best-performing asset of the month, rising 9.7% to $4,437 per ounce, supported by safe-haven demand amid geopolitical uncertainty and persistent concerns over inflation. Oil prices also strengthened, with WTI rising 1.3% to $85.76 per barrel, as tensions around the Strait of Hormuz fuelled concerns over supply and the inflation outlook.

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Equity Funds:

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Chahine Equity Europe Acc posted a +2.3% return in August, vs. +0.5% for the MSCI Europe NR. The fund has gained +19.7% year-to-date, vs. +12.3% for its benchmark.

Since the end of April, our economic momentum indicator has been signalling that European equities have entered a contracyclical phase, and the fund has applied an appropriate portfolio construction strategy that has fully protected its performance lead during the early summer ups and downs. In August, the strong performance of European small- and mid-caps made a positive contribution, as did the sound selection of stocks, particularly in the financial sector (Jyske Bank, AIB) and the healthcare sector (argenX). Chahine Equity Europe remains overweight in consumer discretionary and telecoms. The fund is mainly underweight in materials and consumer staples (food). The UK is the most underweight country but remains the fund's top country weight with 14.4%, ahead of Italy at 12.2% (largest country overweight).

Chahine Equity Continental Europe Acc ended August at +2.3%, vs. +0.7% for the MSCI Europe ex UK NR. The fund has gained +18.2% year-to-date, vs. +11.9% for its index.

Our economic momentum indicator has been signalling since the end of April that European equities have entered a contracyclical phase, and the fund has followed an appropriate portfolio construction strategy that has fully preserved its performance lead during the ups and downs of the early summer. The solid performance of small and midcaps in August contributed positively, as well as the strong stock selection, especially in the finance sector (AIB, KBC, Jyske Bank, Deutsche Börse) and healthcare (argenX). Chahine Equity Continental Europe remains mainly overweight in consumer discretionary, finance and telecoms, and underweight in industrials (defence) and materials. Italy is still the most overweight country, while Switzerland, France and Germany are the most underweight.

Chahine Equity Eurozone Acc posted a +1.7% return in August, vs. +0.9% for the MSCI EMU NR. The fund is up +18.5% year-to-date, ahead of its index at +13.0%.

Following the shift of European equities into a contracyclical phase, as indicated by our economic momentum signal at the end of April, the fund has adopted an appropriate portfolio construction strategy. The fund’s positioning, overweight in finance and real estate, and underweight in the consumer staples sector, was broadly neutral this month. t was the stock selection, particularly in the financial and industrial sectors, that led the fund to outperform its benchmark during the month. The finance sector remains the fund's main overweight, ahead of real estate and consumer discretionary. The fund is still underweight in the IT, consumer staples, energy and materials sectors. With a 24.8% weight, France is now the fund’s largest country, ahead of Italy at 24.2%, the most overweight country. Germany remains the most underweight country.

Chahine Equity Europe Smaller Companies Acc ended August up +3.4%, ahead of the MSCI Europe Small Cap NR at +2.6%. The fund is up +19.5% YTD, vs. +11.5% for its index.

Following the shift of European stocks into a contracyclical phase, as indicated by our economic momentum signal at the end of April, the fund has adopted an adjusted portfolio construction strategy. The fund’s positioning was fairly neutral in August. The fund’s strong performance was largely driven by a sound stock selection, particularly in the industrials, telecommunications, consumer discretionary and energy sectors. Since May, the “contracyclical” mode of the funds making its positioning more stable; it remains significantly overweight in finance and underweight in healthcare and real estate. The United Kingdom remains the portfolio’s largest country exposure at 30.1%, followed by Sweden at 18.5% and Switzerland at 9.2%. Sweden is the most overweight country, and Denmark the most underweight.

Chahine Equity US Acc USD ended August at -1.3%, vs. +2.7% for the MSCI USA NR and +1.9% for the MSCI USA Small Cap NR. The YTD return of the fund is +35.6% vs. +12.8% for its index.

In the United States, August continued the trend seen in July, which was very different from that of the first half of the year. The correction in AI-related stocks following their excellent start to the year weighed on the fund’s performance in August. Furthermore, exposure to small and mid-cap stocks also detracted from performance. The rebalancing carried out in August was fairly diversified, primarily strengthening positions in the consumer discretionary and materials sectors. The finance sector was the most reduced during the portfolio review. The fund maintains a significant overweight position in finance, as well as in IT. The most underweight sectors remain media, consumer staples and healthcare.

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Bond Funds:

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Dynasty Global Convertibles Fund

The global convertible bond market staged a moderate rebound in August, with the Refinitiv FTSE Focus Hedge EUR Index returning +0.53%, following the marked decline recorded in July. The recovery was supported by the rebound in AI- and technology-related stocks, benefiting for the convertible bonds with higher equity sensitivity. Performance dispersion nevertheless remained significant across issuers and sectors.

The primary market remained particularly active in August, driven notably by AI- and technology-related companies. The highlight of the month was Nebius Group’s two-tranche issuance, totalling $5 billion, comprising a 0.50% coupon tranche due 2030 and a 4.50% coupon tranche due 2034, aimed at financing the development of AI-focused data centres. Moderna also issued $3 billion due 2032, notably to finance its investments in oncology and repay debt. Realty Income, Liberty Media and Jazz Pharmaceuticals also accessed the market. In Asia, UMC, Pharmaron Beijing and Marui Group contributed to the geographical diversity of primary market activity.

The fund fully benefited from the rebound in the technology sector, and more particularly from the AI theme. It also benefited from the strong performance of gold-related stocks held in the portfolio, which provide structural diversification as well as a hedge against inflation risk. The fund returned +2.27% in August, bringing its year-to-date performance to +6%. We took advantage of the rebound in AI-related stocks to take profits on several positions that had performed strongly, notably Lumentum, Bloom Energy, Wiwynn and Schneider Electric. These trades enabled us to reduce the portfolio’s overall equity sensitivity, and more specifically our exposure to the AI theme.

At month-end, the fund’s equity sensitivity stood at 37%, average credit sensitivity at 1.35, and the portfolio’s average rating at BBB.