European equity markets posted strong returns in the first month of 2023. Investors appeared to be taking a fairly sanguine view on inflation and interest rates with many commentators now beginning to discuss a likely pivot in policy towards easing of central banks interest rates later in the year, led by the US. More cyclical areas of the market, including Consumer Discretionary, Financials, Industrials and Materials performed strongest during the month.
The fund also enjoyed a strong start to the year.
Amongst the larger contributors to performance were three of our holdings within our Technology/Digitalisation cluster – Visiativ (IT Services), Sword (IT Services) and ASMI (Semiconductor equipment supplier). All of these companies reported very strong preliminary results for 2022 during the month. Also noteworthy were strong performances from TGS Nopec (Resources Services) and Boliden (mining and smelting).
The main detractors from performance came from Var Energie (oil and gas production), which was weaker despite reassuring results – the market still appears to be punishing them for poorly communicated maintenance stoppages last year. Ox2 (wind farm service provider) was also weak, despite positive development news – we have been accumulating a position here, and took advantage of the weakness to add to our initial position.
Over the month, we added a new holding in Imerys. Imerys is a French based minerals business supplying a range of clients with additives for sustainable construction, natural solutions for consumers and green mobility/sustainable energy. It also owns two significant lithium deposits in France and UK, which is a vital component in electric vehicle batteries, and energy storage.