European equity markets were weaker over the month. Although the ECB cut interest rates, this was overshadowed by the political situation in France, the second largest economy in the Eurozone. Macron’s dissolution of Parliament and the calling of a snap election has unnerved investors as they contemplate the ramifications of a likely change in government. In this uncertain environment, smaller companies underperformed their larger counterparts over the month.

The fund was also down over the month, given its significant exposure to smaller companies.

In terms of positive contributors, ASM International and BE Semiconductor Industries (both semiconductor capital equipment suppliers) enjoyed a strong month in terms of share price performances. Roche (pharmaceuticals) was strong over the month, reversing some of its recent underperformance as it announced various positive updates on its businesses. Alkemy (digital marketing specialist) advanced following a takeover approach for the company. Valmet (technology supplier to pulp, paper, and energy industries) was also a notable contributor to performance over the month as it raised profit expectations.

Detractors from performance, unsurprisingly came largely from the fund’s French companies, with 6 of the bottom 10 performers being domiciled in France. There was no specific news on these companies, they were simply marked down by markets in response to events.

The fund took advantage of the strong share price performance of Valmet to take profits, exiting the holding. Ox2 (wind farm developer) was also sold over the month, following the bid approach for the company.

The fund has approximately 20% of its holdings in companies which are domiciled in France. However, the exposure to the domestic French economy of these companies is much lower, at closer to 7%. While we recognise that political uncertainty is difficult to analyse, we firmly believe that indiscriminate markdowns in share prices of businesses will give us opportunities to selectively purchase and add to good companies at attractive prices and we continue to do so.