The investment letter - March 2026

Equity market:

The war  in the Middle East disrupted the bullish momentum of equity indices in March  (MSCI USA NR -4.6%, MSCI Europe NR -7.7%) and fueled extraordinary sector  dispersion on both sides of the Atlantic. Unsurprisingly, the Energy sector emerged as the clear winner. In Europe, Energy rallied +14.5%, proving to be  the only sector in positive territory for the month. In the United States,  the Energy sector surged +15.3%, finishing well ahead of Utilities (+1.7%),  the month's second-best performing sector.

The  duration and ultimate outcome of the conflict have clearly become critical at  this juncture. A genuine race against time is now underway to preserve an  economic cycle that has remained resilient for over three years, but is now  threatened by a large-scale energy shock.

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Fixed income market:

March  proved particularly challenging across all asset classes, as geopolitical  tensions dominated market dynamics. The escalation of the US-Israeli conflict  with Iran disrupted energy markets and triggered a widespread risk-off  sentiment. Against this backdrop, equity markets experienced heightened  volatility, with the S&P 500 retreating 5% over the month, while Asian  markets posted their worst monthly performance in over 17 years before  staging a partial late-month recovery fueled by de-escalation signals from  President Trump. In fixed income, the 10-year US Treasury yield tightened  (rose) from 4.04% at the start of the month to 4.32% at month-end, peaking at  4.43% on March 27. In Europe, ECB monetary policy expectations underwent a  notable reversal: markets shifted from pricing in potential rate cuts to fully pricing in a 25-basis-point hike by December. Credit spreads widened  significantly throughout most of the period before tightening during the final session, bolstered by hopes of a resolution to the Middle East  conflict.

Global convertible bonds faced marked pressure in March, weighed down by  escalating geopolitical tensions and growing doubts regarding the  sustainability of the AI theme, with notable underperformance in Asia—SK  Hynix and Alibaba being among the primary detractors. Nevertheless, the  primary market remained active with $16.1 billion in new issuances,  approximately 1.7 times the historical monthly average, driven by Nebius’s  flagship deal—a $4 billion dual-tranche offering dedicated to financing  AI-related CAPEX. Year-to-date, global issuance has reached $53.3 billion,  compared to $23.3 billion over the same period last year, even though the  market contracted by $16.9 billion in net terms, reflecting significant redemptions from the 2021 vintage.

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Chahine Funds :

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Chahine Equity Europe Acc posted a -8.1% return in March, vs. -7.7% for the MSCI Europe NR. The fund has gained +1.6% year-to-date, vs. -0.9% for its benchmark.

The activation of our smoothing mechanism reduced the portfolio’s active risk, mitigating on a daily basis the negative impact of this month’s market volatility. The financial and industrial sectors helped the fund hold up well in March, against the backdrop of the war in the Middle East, where the only positive sector was energy. The fund was affected by the rise in oil prices because of its limited exposure to Big Oil companies. The metals and mining sector, overweight in the portfolio, had the strongest negative impact on performance.

The portfolio reviews carried out in March included the smoothing mechanism. They have mainly increased our positions in the consumer discretionary, communication services and consumer staples sectors, and significantly reduced those in materials (metal and mining).

Chahine Equity Europe is overweight financials services, IT and industry (construction/engineering), and remains significantly underweight healthcare and consumer staples.

The UK remains the fund's top country weight with 20.6%, ahead of Germany at 12.0% and Italy at 10.7% (largest country overweight). Switzerland and France are the two most underweight countries.

Chahine Equity Continental Europe Acc ended March at -6.9%, ahead of for the MSCI Europe ex UK NR at -8.3%. The fund has gained +1.2%, vs. -2.4% for its index.

The activation of our smoothing mechanism reduced the portfolio’s active risk, mitigating on a daily basis the negative impact of this month’s market volatility. The industrial and financial sectors enabled the fund to outperform the market in March. Against the backdrop of the war in the Middle East, the fund benefited from a strong position in energy, which was the only positive sector of the month. The metals and mining sector had the most significant impact on the fund’s performance.

The portfolio reviews carried out in March included the smoothing mechanism. They have mainly increased positions in the consumer discretionary, communication services, consumer staples and healthcare sectors, and significantly decreased the materials (metals/mining) and industry (construction/engineering) sectors.

Chahine Equity Continental Europe is mainly overweight in finance. The fund remains significantly underweight in healthcare and consumer staples.

Germany remains the fund’s largest country with a 14.7% weight, ahead of France at 11.9% and Italy at 11.8%. Austria and Italy are the two most overweight countries, and Switzerland and France the two most underweight.

Chahine Equity Eurozone Acc posted a -7.9% return in March, vs. -8.4% for the MSCI EMU NR. The fund is down -2.0% year-to-date, slightly ahead of its index at -2.4%.

In March, the “all-cap” positioning and a good selection of stocks led to an outperformance, in a highly volatile market. The consequences of the war in the Middle East, particularly on the energy sector which is not represented in the fund, had a very negative impact on performance. Nevertheless, the renewable energy stocks in the portfolio offset this absence, notably SMA Solar Technology, which ended the month up +44%.

The portfolio reviews carried out in March were diversified, notably strengthening positions in the utilities and healthcare sectors. Among the exits were mainly stocks from the consumer discretionary and finance sectors.

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

Italy remains the fund's largest weighting at 18.2%, followed by Spain at 16.4% and France at 14.4%. Italy is the most overweight country, and France the most underweight.

Chahine Equity Europe Smaller Companies Acc ended March down -9.9%, vs. -8.3% for the MSCI Europe Small Cap NR. The fund is up +1.3% YTD, vs. -2.8% for its index.

The activation of our smoothing mechanism reduced the portfolio’s active risk, mitigating on a daily basis the negative impact of this month’s market volatility. The fund benefited from its exposure to the industrial and technology sectors, particularly defence and semiconductors, allowing it to hold up well in March amid the war in the Middle East, where the only positive sector was energy. It was the metals and mining sector, overweight in the portfolio, that had the strongest impact on the fund’s performance, although this was significantly mitigated by our smoothing mechanism.

The portfolio reviews carried out in March included the smoothing mechanism. They have mainly strengthened positions in the consumer discretionary, real estate, communication services, healthcare and finance sectors. The main exits were in the metals/mining sector.

The portfolio is now overweight in IT and materials, and underweight in real estate and healthcare.

The United Kingdom (the most underweighted country) remains the portfolio's main exposure at 21.2%, ahead of Germany at 13.0% and Sweden at 11.2%.

Chahine Equity US Acc USD ended March at -5.7%, vs. -4.9% for the MSCI USA NR and -5.3% for the MSCI USA Small Cap NR. The YTD return of the fund is +7.3% vs. -4.6% for its index.

The fund benefited from its exposure to healthcare equipment stocks and banks. However, its underweight position in the energy sector, which was the focus of concern during March, had a negative impact on the fund.

The portfolio review carried out in March was diversified. It has reduced the IT, media and finance sectors, and has reduced the real estate, materials, consumer discretionary and industry sectors.

The fund remains significantly overweight in finance, IT and industry. The most underweighted sectors remain media and consumer staples.

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