Listed Markets

 

High volatility among the US tech names beginning of August vanished after a couple of days and the rally continued over Q3.

 

As exemplified on the graph to the right, the concentration in a handful of Tech companies remains very high: our team is questioning what kind of index volatility could ensue in the short term.

 

During Q3, the market saw some rotation away from Growth and Tech towards Value stocks and smaller companies. Investors have been seeking undervalued opportunities to compensate for the high August market volatility (Japan market sell-off combined with recession fears stemming from US jobs reports). The Fed interest rate cut came in September at 50bps, which was welcomed to stimulate economic growth.

 

On the commodities front, metals have maintained their upwards trajectory (Gold, Silver, Copper) but oil prices have been stable, which is not likely to last in the currently tense geopolitical environment.

 

Chinese authorities launched a massive plan to support local companies, with an eye on reigniting the stock market: more flexible reserves required for banks, freeing up capital for new loans; lower interest rate to support the real estate market as well as households’ consumption etc. This had an immediate and material impact on the Shenzhen index (+28% during the month of Sept after reaching a post-Covid low point).

 

The Portolani Selection returned 1,59% over the quarter and 10,7% over the year, bringing the 2-year performance between the MSCI all-countries world indices based on market cap and equalweighted.

 

The Portolani selection performed in line on:
– Quality: The bigger focus on fundamentals provided tailwind for MSIM that gained 4,35% over the quarter. Artisan Value made 1,67% over the period and Heptagon Yacktman lost 0,62%. These funds are underweight in IT which continued to outperform the market.
– Small caps: were rediscovered over the summer and posted strong returns. Alken gained 3,15% over Q3, Lightrock made 4,89%. Low valuations of small caps and lower interest rates provided a tailwind for small caps. Investors expect strong earnings growth in 2025.

 

The Portolani selection outperformed on:
– Growth: Artisan Global opportunities returned 0,24%, Seilern was flat over the quarter and Guardcap gained 5,15%. GQG that has a much higher exposure to the magnificent 7 and posted very strong returns YTD, declined with 3,58% over the quarter. GQG profited a lot from its exposure to Nvidia but sold it out after the nervosity beginning of August. It did not profit from the rebound seen in August. The MSCI ACWI Growth declined -0,06% over Q3.

 

The Portolani selection underperformed on:
– Value: The large cap value managers made significant profits over the summer. Brandes gained +3,7% and Robeco Global +4,28%. The financials and pharma stocks posted strong returns after publishing good results. Magallanes lost -1,45%, punished by higher exposure to industrials and zero exposure to US stocks. The ACWI Value index gained 5,22% over Q3.
– Emerging Markets: GQG lost -5.58% over the quarter. The low exposure to Chinese stocks and higher exposure to IT stocks caused the lower performance. Robeco (+1.76%) performed strongly over the quarter and profited from higher exposure to China. The EM index, with much higher exposure to China, made 4,41%.

 

Looking forward, Q4 will see the highly anticipated US elections, with a potential impact on the Inflation Reduction Act, as well as other highly regulated sectors such as Pharma, Energy or Financial Services.

 

Private Markets

 

We had the pleasure to welcome many of our investors during our Venture Capital Review on 2 October. The Galdana team and 20 people around the table shared ideas about the latest developments across the VC world. It was a great chance to exchange with clients and prospects about their questions and ambitions in PMI. Thanks to everyone who attended this discussion which highlighted some promising areas in the market: Marcel Rafart and his team were positive on three themes:

 

1/ China,
2/ Artificial Intelligence, and
3/ VC Secondaries.

 

Our team also attended the IPEM conference in Paris, as well as the Private Wealth Benelux conference from Markets Group in Amsterdam. The mood during these discussions was cautiously optimistic, after two years of subdued activity. Exits are picking up pace from a low point, and the market aims (hopes?) for a busy Q4 in M&A. Goldman Sachs shared their perspective that across the market, “NAV was 10% higher than the real value”. We have a slightly more contrasted view, i.e. that the historic value increases crystallised at exit (typically c. 15-20%) are bound to be more contained in the coming quarters. We trust the accounting policies from the managers we have selected but remain cautious on their ability to create as much value in the short term as they have in the past.

 

On the fundraising side, a flight of capital towards the larger and most established names can be seen. Timelines remain quite elastic for many smaller actors raising younger funds. We see however a visible rebound in allocations towards PMI as:

 

1/ some value can be realised by secondary sales,
2/ interest rates started to decrease, helping the companies’ valuations,
3/ the stock market is healthy, thereby decreasing the pressure from the “denominator effect”.

 

Portolani PMI selection
o HIG Bayside VII remains open as a Private Debt opportunity, in a compelling market environment for this opportunistic strategy acquiring secondary debt positions in healthy companies.
o We keep gathering interest for EQT’s new Nexus evergreen vehicle for a shortterm allocation.
o Q4: we are in the last stages of the
▪ 2024 Infrastructure selection (Ardian is a leading choice tbc.), as well as a
▪ Small and mid-cap buyout option (HIG is a leading choice tbc.).

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Listed Markets

 

High volatility among the US tech names beginning of August vanished after a couple of days and the rally continued over Q3.

 

As exemplified on the graph below, the concentration in a handful of Tech companies remains very high: our team is questioning what kind of index volatility could ensue in the short term.

 

During Q3, the market saw some rotation away from Growth and Tech towards Value stocks and smaller companies. Investors have been seeking undervalued opportunities to compensate for the high August market volatility (Japan market sell-off combined with recession fears stemming from US jobs reports). The Fed interest rate cut came in September at 50bps, which was welcomed to stimulate economic growth.

 

On the commodities front, metals have maintained their upwards trajectory (Gold, Silver, Copper) but oil prices have been stable, which is not likely to last in the currently tense geopolitical environment.

 

Chinese authorities launched a massive plan to support local companies, with an eye on reigniting the stock market: more flexible reserves required for banks, freeing up capital for new loans; lower interest rate to support the real estate market as well as households’ consumption etc. This had an immediate and material impact on the Shenzhen index (+28% during the month of Sept after reaching a post-Covid low point).

 

The Portolani Selection returned 1,59% over the quarter and 10,7% over the year, bringing the 2-year performance between the MSCI all-countries world indices based on market cap and equalweighted.

 

The Portolani selection performed in line on:
– Quality: The bigger focus on fundamentals provided tailwind for MSIM that gained 4,35% over the quarter. Artisan Value made 1,67% over the period and Heptagon Yacktman lost 0,62%. These funds are underweight in IT which continued to outperform the market.
– Small caps: were rediscovered over the summer and posted strong returns. Alken gained 3,15% over Q3, Lightrock made 4,89%. Low valuations of small caps and lower interest rates provided a tailwind for small caps. Investors expect strong earnings growth in 2025.

 

The Portolani selection outperformed on:
– Growth: Artisan Global opportunities returned 0,24%, Seilern was flat over the quarter and Guardcap gained 5,15%. GQG that has a much higher exposure to the magnificent 7 and posted very strong returns YTD, declined with 3,58% over the quarter. GQG profited a lot from its exposure to Nvidia but sold it out after the nervosity beginning of August. It did not profit from the rebound seen in August. The MSCI ACWI Growth declined -0,06% over Q3.

 

The Portolani selection underperformed on:
– Value: The large cap value managers made significant profits over the summer. Brandes gained +3,7% and Robeco Global +4,28%. The financials and pharma stocks posted strong returns after publishing good results. Magallanes lost -1,45%, punished by higher exposure to industrials and zero exposure to US stocks. The ACWI Value index gained 5,22% over Q3.
– Emerging Markets: GQG lost -5.58% over the quarter. The low exposure to Chinese stocks and higher exposure to IT stocks caused the lower performance. Robeco (+1.76%) performed strongly over the quarter and profited from higher exposure to China. The EM index, with much higher exposure to China, made 4,41%.

 

Looking forward, Q4 will see the highly anticipated US elections, with a potential impact on the Inflation Reduction Act, as well as other highly regulated sectors such as Pharma, Energy or Financial Services.

 

Private Markets

 

We had the pleasure to welcome many of our investors during our Venture Capital Review on 2 October. The Galdana team and 20 people around the table shared ideas about the latest developments across the VC world. It was a great chance to exchange with clients and prospects about their questions and ambitions in PMI. Thanks to everyone who attended this discussion which highlighted some promising areas in the market: Marcel Rafart and his team were positive on three themes:

 

1/ China,
2/ Artificial Intelligence, and
3/ VC Secondaries.

 

Our team also attended the IPEM conference in Paris, as well as the Private Wealth Benelux conference from Markets Group in Amsterdam. The mood during these discussions was cautiously optimistic, after two years of subdued activity. Exits are picking up pace from a low point, and the market aims (hopes?) for a busy Q4 in M&A. Goldman Sachs shared their perspective that across the market, “NAV was 10% higher than the real value”. We have a slightly more contrasted view, i.e. that the historic value increases crystallised at exit (typically c. 15-20%) are bound to be more contained in the coming quarters. We trust the accounting policies from the managers we have selected but remain cautious on their ability to create as much value in the short term as they have in the past.

 

On the fundraising side, a flight of capital towards the larger and most established names can be seen. Timelines remain quite elastic for many smaller actors raising younger funds. We see however a visible rebound in allocations towards PMI as:

 

1/ some value can be realised by secondary sales,
2/ interest rates started to decrease, helping the companies’ valuations,
3/ the stock market is healthy, thereby decreasing the pressure from the “denominator effect”.

 

Portolani PMI selection
o HIG Bayside VII remains open as a Private Debt opportunity, in a compelling market environment for this opportunistic strategy acquiring secondary debt positions in healthy companies.
o We keep gathering interest for EQT’s new Nexus evergreen vehicle for a shortterm allocation.
o Q4: we are in the last stages of the
▪ 2024 Infrastructure selection (Ardian is a leading choice tbc.), as well as a
▪ Small and mid-cap buyout option (HIG is a leading choice tbc.).

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