The Investment Letter - July 2026

Equity Market

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Equity indices ended June with mixed results. Europe posted solid gains, with the MSCI Europe NR up +3.0%, while the United States stepped back, with the MSCI USA NR down -0.9%.

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Beyond this geographic divergence, performance remained particularly mixed within the markets themselves. For example, European small-and mid-cap fell by -3.0%, while their U.S. counterparts posted a spectacular gain of +5.3%, according to MSCI indices.

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Market sentiment also benefited from renewed calm on the geopolitical front. The announcement of a memorandum between Iran and the United States was welcomed by investors, as were the sharp drop in oil prices and the corresponding decline in inflation expectations.

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Against this backdrop of apparent easing of inflationary pressures, it was, paradoxically, the central banks that drew the most attention. Unsurprisingly, the ECB raised its policy rates by 25 basis points, despite a weakening economic momentum in Europe. For its part, the Fed surprised markets with the tone of its statement, as investors perceived there marks of its new chairman, K. Warsh, as relatively hawkish.

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Fixed Income Market

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Global equity markets delivered a mixed July, dominated by the heavy underperformance of the technology sector as the AI trade hit several roadblocks. Semiconductors entered a bear market dragging the Nasdaq down 3.2%, while the S&P 500 was broadly flat (-0.13%). Japan and Kora heavily underperformed, while Europe managed to finish up 1.16% during the month. The hyperscalers were in the center of the action, Amazon and Microsoft were standout winners on strong cloud results, but Meta, Tesla and Apple were punished. An aggressive rotation favoured energy, as renewed US-Iran hostilities pushed Brent above $90. The Fed held rates, with three dissenters favouring a hike; despite soft inflation, long-end yields rose sharply, the 10-year Treasury climbing 25bps to 4.72% and the 30-year nearing its highest since 2007. In credit, Global Investment Grade returned -1.35% and Global High Yield -0.53%.

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Equity Funds:

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Chahine Equity Europe Acc posted a -1.2% return in July, vs. +1.0% for the MSCI Europe NR. The fund has gained +17.0% year-to-date, vs. +11.8% for its benchmark.

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Following the entry of European equities into a contracyclical regime, as signalled by our economic momentum indicator at the end of April, the fund has switched to an appropriate portfolio construction strategy. This approach helped to preserve around 4% of performance in July alone. However, the sharp rebound in oil stocks and the downturn in technology shares weighed on the fund’s performance in relative terms.

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Chahine Equity Europe remains overweight in consumer discretionary and telecoms. The fund is mainly underweight in industry, healthcare and consumer staples.

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The UK becomes the most underweight country but remains the fund's top country weight with 15.6%, ahead of Italy at 11.9% (largest country overweight).

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Chahine Equity Continental Europe Acc ended July at -1.5%, vs. -0.1% for the MSCI Europe ex UK NR. The fund has gained +16.6% year-to-date, vs. +11.1% for its index.

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Following the entry of European equities into a contracyclical regime, as signalled by our economic momentum indicator at the end of April, the fund has switched to an appropriate portfolio construction strategy. This approach helped to preserve more than 4% of performance in July alone. However, the sharp rebound in oil stocks and the downturn in industry and technology shares weighed on the fund’s performance in relative terms.

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Chahine Equity Continental Europe remains mainly overweight in consumer discretionary and finance, and underweight in industrials.

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Italy is still the most overweight country, while France, Germany and Switzerland are the most underweight.

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Chahine Equity Eurozone Acc posted a -3.4% return in July, vs. -0.5% for the MSCI EMU NR. The fund is up +16.5% year-to-date, ahead of its index at +11.9%.

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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. This approach enabled the fund to preserve more than 5% of performance in July alone. The sharp rebound in oil stocks and the downward trend in technology and certain industrial segments weighed on the fund’s performance in relative terms.

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The finance sector remains the fund's main overweight, ahead of real estate and consumer discretionary. The fund is still underweight in the industry, consumer staples, energy, materials and IT sectors.

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With a 25.5% weight, Italy is the fund’s largest country and the most overweight. Germany remains the most underweight country.

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Chahine Equity Europe Smaller Companies Acc ended July down -3.4%, behind the MSCI Europe Small Cap NR at -0.5%. The fund is up +16.5% YTD, vs. +8.7% for its index.

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Following the shift of European stocks into a countercyclical phase, as indicated by our economic momentum signal at the end of April, the fund has adopted an adjusted portfolio construction strategy. This approach enabled the fund to preserve more than 4% of performance during the month of July alone. The downturn in technology and certain industrial sectors weighed on the fund’s relative performance.

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Since May, the “countercyclical” mode of the funds making its positioning more stable; it remains significantly overweight in financials and underweight in healthcare and real estate.

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The United Kingdom remains the portfolio’s largest exposure at 31.3%, followed by Sweden at 16.8% and Switzerland at 9.7%. Sweden is the most overweight country, and Denmark the most underweight.

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Chahine Equity US Acc USD ended June at -12.0%, vs. -0.1% for the MSCI USA NR and -4.6% for the MSCI USA Small Cap NR. The YTD return of the fund is +37.4 vs. +9.8% for its index.

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In the United States, July saw a very different trend compared to the first semester. The correction in AI-related stocks following their excellent start to the year weighed on the fund’s performance in July. In addition, exposure to small- and mid-cap stocks also dragged on performance in July. Compounding this was the fund’s underweight position in the energy sector, which benefited from the turnaround in the situation in Iran. The main positive contributor to performance this month was the overweight position in the financial sector amid rising U.S. long-term interest rates.

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The rebalancing carried out in July was fairly diversified, primarily strengthening positions in the technology and consumer discretionary sectors. On the outflow side, financial stocks accounted for the majority of the outflows.

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The fund maintains a significant overweight position in technology and finance, as well as in industrials. The most underweight sectors remain media and healthcare.

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Bond Funds:

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Dynasty Global Convertibles Fund

Dynasty Global Convertibles – Share Class B (EUR) declined 2.42% in July, amid a sharp correction in the AI complex, where our highest-conviction positions are concentrated (memory, storage and optical components). Semiconductors fell roughly 20% from their June record, with the weakness spreading through Taiwan, Korea, memory names and hyperscalers. In our view this was a positioning correction, not a fundamental one: bellwethers such as TSMC and ASML reported record results and strong guidance yet sold off anyway, as record hedge-fund exposure unwound and leveraged ETFs amplified every downtick. The sell-off deepened into month-end before reversing sharply as forced deleveraging run its course and earnings landed. Crucially, we chose to hold these positions: nothing in the fundamentals had changed, the memory shortage remains structural and multi-year, and the selling reflected positioning rather than demand. That discipline was rewarded into month-end. Earnings proved fundamentals were stronger, and the names that led the 30 July rebound were precisely our convictions and the beneficiaries of hyperscalers’ capex. We are not retreating from the AI theme; we are managing it through the cycle. We own the beneficiaries of the capex build-out via convertibles, with a bond floor and average BBB quality , rather than the leveraged balance sheets funding the spending, a distinction that matters as the theme increasingly becomes a credit story.

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We used the reset to add selectively where valuations had corrected but fundamentals had strengthened. We initiated a position in Ibiden, reinforcing our exposure to AI advanced-packaging, and added to Hyundai Heavy Industries following its post-correction pullback and solid earnings. We increased Schneider Electric ahead of results, given its leverage to electrification and data-centre power demand and added ENI to capture the energy sector's momentum as Brent rallied above $90. We took partial profits ahead of earnings in Snowflake and Palo Alto Networks after strong performance in both, trimming risk into potentially volatile results. The primary market remained active, but with significantly lower deals, given the high market volatility and the current earning season blackouts for issuers.

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At month-end, the fund's equity sensitivity stood at 38.5%, with an average interest rate sensitivity of 1.05% and an average portfolio rating of BBB.‍