The first quarter of 2026 was marked by intense geopolitical instability, culminating in the conflict in Iran in early March. Despite this highly volatile environment, our European equity strategy “Mission Europa” successfully navigated market turbulence while maintaining its core objectives. With a fragile ceasefire signed on April 8, we discuss the portfolio’s strategy with Anthony Penel, European equities portfolio manager at Edmond de Rothschild Asset Management ( France).
The strategy maintained a solid track record throughout the conflict in Iran. How did you manage the volatility, and what were the primary performance drivers?
The strategy's success is fundamentally rooted in its DNA: European Sovereignty. It is important to reiterate that “Mission Europa” is not a pure "defense strategy", but rather a diversified portfolio built around four pillars: Security, Competitiveness, Innovation, and Finance. This complementarity allows one theme to offset another, a strategy that is currently bearing fruit.
Over the past quarter, the Energy sector was highly profitable for us. Since the strategy's launch, we have selected oil majors such as Repsol (Spain) and ENI (Italy)1. These companies secure Europe’s supply of critical petroleum products-such as fuels, naphtha for the chemical industry, and bitumen for public works-through their refineries located in the Iberian Peninsula and Italy. During the crisis period (February 27 to April 7), these stocks surged by over 25%, while the broader market (MSCI EMU) declined by 7%2.
We also benefited from our stock picking within the Capital Goods sector. Despite the sector's overall downturn, our defense holdings–including Exail, Hensoldt, Exosens, Avio, Leonardo, and Thales1–acted as effective shock absorbers. Furthermore, stock exchanges like Deutsche Börse and Euronext, which are at the heart of financing European sovereignty through the IPO market, maintain a highly defensive profile in volatile markets.
Consequently, in the first quarter of 2026, the five largest positive contributors to the portfolio’s performance came from three companies in the energy sector (Repsol +60%; ENI +56%; GTT +30%)1, as well as one defense company (Exail +46%)1 and one company in the innovation sector (BESI +34%)1. Conversely, underperformance was concentrated in software (Dassault Systèmes -28%, SAP -29%)1 and healthcare with Novo Nordisk¹ (-27%), weighed down by disappointing earnings guidance.
Given recent developments in the Middle East, do you plan to adjust your sector exposure or allocation?
Our allocation remains balanced across our four pillars. However, the consequences of this crisis prompt us to overweight oil companies, particularly European majors with significant refining assets, as their margins are expected to remain structurally high. Even with the reopening of the Strait of Hormuz, the damage sustained by Persian Gulf refineries will maintain long-term pressure on global supply.
Tactically, we have accumulated a significant lead of 300 basis points (bps) over the MSCI EMU (NR) benchmark index through our stock picking and sector allocation3. We remain vigilant regarding the Technology and Materials sectors: while semiconductors outperformed, software struggled, and the mining firm Boliden dropped 30% following the slump in metal prices.
European sovereignty issues are more relevant than ever. What are your high-conviction plays for the remainder of 2026?
Latent confrontations between global blocs will persist, even if ceasefires are signed in Ukraine and the Middle East. The situation in Taiwan remains a pending geopolitical risk, compounded by the US President's questioning of NATO commitments.
After 30 years of underinvestment in defense, European states must accelerate their rearmament. European defense companies must now gear up to meet this demand throughout 2026 and beyond.
Furthermore, energy security remains a top priority. The Iranian shock advocates for a relocation of refining capacities and an acceleration of industrial electrification. Additionally, amidst the AI revolution, Europe has major strengths: AI development cannot proceed without European semiconductor equipment manufacturers.
Finally, while 2026 is likely too soon to see progress on the banking union, we may see a faster pace of change in the banking consolidation landscape, including cross-border consolidation.
1The information regarding securities contained in this document should in no way be construed as an opinion by Edmond de Rothschild Asset Management (France) on the future performance of the share prices of the companies in question, nor, where applicable, on the likely performance of the financial instruments that these companies may issue. No information contained in this document may be construed as a solicitation to buy or sell these shares. The composition of the portfolio may change in the future.
2Source: Bloomberg.
3Source: Edmond de Rothschild AM, data as of April 7, 2026. Past performance is not a guarantee of future results. Performance is not consistent over time. Performance figures do not take into account fees and commissions incurred in connection with the issuance and redemption of shares, but include ongoing expenses, intermediary fees, and any performance fees charged.
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April 2026. This document is issued by the Edmond de Rothschild Group. It is not legally binding and is intended solely for information purposes. This document may not be communicated to persons located in jurisdictions in which it would be considered as a recommendation, an offer of products or services or a solicitation, and in which case its communication could be in breach of applicable laws and regulations. This document has not been reviewed or approved by a regulator of any jurisdiction. The figures, comments, opinions and/or analyses contained herein reflect the sentiment of the Edmond de Rothschild Group with respect to market trends based on its expertise, economic analyses and the information in its possession at the date on which this document was drawn up and may change at any time without notice. They may no longer be accurate or relevant at the time of reading, owing notably to the publication date of the document or to changes on the market. This document is intended solely to provide general and introductory information to the readers, and notably should not be used as a basis for any decision to buy, sell or hold an investment. Under no circumstances may the Edmond de Rothschild Group be held liable for any decision to invest, divest or hold an investment taken on the basis of these comments and analyses. The Edmond de Rothschild Group therefore recommends that investors obtain the various regulatory descriptions of each financial product before investing, to analyse the risks involved and form their own opinion independently of the Edmond de Rothschild Group. Investors are advised to seek independent advice from specialist advisors before concluding any transactions based on the information contained in this document, notably in order to ensure the suitability of the investment with their financial and tax situation. Past performance and volatility are not a reliable indicator of future performance and volatility and may vary over time, and may be independently affected by exchange rate fluctuations. Source of the information: unless otherwise stated, the sources used in the present document are those of the Edmond de Rothschild Group. This document and its content may not be reproduced or used in whole or in part without the permission of the Edmond de Rothschild Group.
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