CM-AM Convictions Euro

1/ What are the key characteristics of the CM-AM Convictions Euro fund? 

CM-AM Convictions Euro is an actively managed, high-conviction fund managed on a discretionary basis that targets estimated value-creating companies in Europe. 

It is aligned with four transformative mega trends that shape our future and serve as potential long-term growth drivers, regardless of short-term economic fluctuations: Innovation, Sustainable Economy, Well-being and Lifestyle, and Longevity. 

We invest in business models that are understandable, sustainable, and well-positioned in attractive sectors across all market capitalizations to optimize potential performance and maintain liquidity. Our management style is proactive, based on strong convictions and mainly focuses on quality and growth stocks. We also diversify the portfolio to suit market conditions or paradigm shifts. 

2/ Can you describe your investment process in detail?

The investment process relies on proprietary tools, integrating both qualitative and quantitative factors, underscoring the relevance of our fundamental approach. 

The investment process begins with quantitative screening using a "Radar Tool" to filter the defined universe and identify opportunities based on growth metrics, earnings revisions, and return ratios. This screening is complemented by in-depth fundamental analysis, evaluating business models through a standardized DCF approach that incorporates balance sheet structure and operational leverage assessments. It allows to estimate the medium-term upside potential of companies.         

The investment process includes a rigorous risk control framework that incorporates liquidity risk monitoring, volatility monitoring of individual lines, adjusted for weight, within the portfolio, and monthly performance contributions review meeting with the extended management team.

Furthermore, the investment process integrates rigorous and discerning Environmental, Social, and Governance (ESG) criteria at various stages of the investment process. 

3/ How does the fund perform in terms of return and volatility? 

Recent performance figures underscore the effectiveness of our strategy. For 2024, CM-AM Convictions Euro (S Share class) delivered a return of 15.7%1, outperforming its benchmark (Euro Stoxx Net Return2) at 9.3%1. The fund's annualized performance over the past ten years stands at 9.1%1, compared to 7.1%1 for its benchmark as of end of 2024, demonstrating consistent value creation over time1. The fund has recorded historical volatility metrics of 18.2%1 compared to 19.1%1 for the reference indicator over the analyzed period, with observed volatility readings below the reference indicator in 60%1 of cases (Main associated risks: capital loss risk, equity market risk, discretionary management risk, concentration risk, liquidity risk, foreign exchange risk).

Furthermore, the fund has an overall Morningstar Rating of 4 Stars as of December 313.

4/ What factors contributed to the fund’s performance in 2024?

In 2024, the performance of CM AM Convictions Euro can be attributed to four key contributors:

• Strong Bottom-Up Selection: leveraging our robust bottom-up selection process, we have overweighted positions in promising sectors and companies. Notable contributors included Aerospace and Defense companies like Safran4, Rolls-Royce4, and Leonardo4, as well as automation and electrification leaders such as Schneider Electric4, Siemens4, and Prysmian4. 

• Innovation and Technology Sector Performance: A core element of the fund's strategy, the technology sector, particularly Cloud and AI, performed exceptionally well in 2024 although there was significant disparity between stocks. SAP4, a key player in this space, contributed positively. 

• Effective Management During July Stress: The market stress in July, driven by uncertainty around job markets and equity turmoil in Japan, was well navigated. We strategically increased positions in a select number of stocks, particularly in the tech sector, which helped to mitigate the adverse impact during the period of heightened uncertainty.

• Prudent Management of French Exposure: We actively managed French exposure amid electoral and legislative uncertainties, reducing locally focused companies such as Vinci4 and Veolia4, while maintaining positions in internationally exposed companies. As a result, despite the widening of the OAT spread, the portfolio navigated this volatile period effectively.

In summary, the 2024 performance of CM AM Convictions Euro was driven by strategic sector allocations, strong stock selection, effective risk management during periods of stress, and adaptive adjustments to local political conditions. These factors combined to produce a well-balanced and resilient portfolio in a challenging market environment.

5/ How does the CM-AM Convictions Euro fund integrate sustainable investment into its strategy?

We systematically integrate ESG criteria into our investment process through a bonus/penalty approach applied to the Weighted Average Cost of Capital (WACC), based on the companies' ESG ratings. This approach ensures our portfolio consistently maintains an ESG score above that of its investment universe. In addition, we actively monitor two key performance indicators: carbon intensity and board gender diversity, prioritizing companies that demonstrate strong ESG commitments.

To ensure the continued success of our strategy, we regularly conduct model reviews, with portfolio management decisions driven by clearly defined risk parameters and investment criteria that align with our long-term value creation objectives. This results in a minimum sustainable investment threshold of 30%.

CM-AM Convictions Euro meets the criteria for SFDR 8 classification5, aligning financial objectives with responsible investment practices.

6/ How is the CM-AM Convictions Euro fund positioned to tackle the current macroeconomic challenges in Europe?

CM-AM Convictions Euro stands out in the current environment due to its proven resilience during periods of market stress. When the Euro Stoxx2 index declined by more than 5%1 in a month, the fund outperformed its benchmark in 72%1 of cases1. Moreover, historical analysis indicates that the fund has generally shown lower volatility than its benchmark during economic downturns. 

Looking ahead, while European markets face ongoing challenges such as political uncertainties and the costs associated with the energy transition, the fund's strategic focus on companies with strong competitive positions and sustainable business models is well positioned. Coupled with its proven ability to protect capital during market downturns, the fund presents an appealing option for investors seeking exposure to European equities in the current environment. Its resilience and commitment to sustainable growth makes it an attractive choice for those looking to navigate the complexities of the European market.

To find out more : Convictions funds 

Main associated risks: capital loss risk, equity market risk, discretionary management risk, concentration risk, liquidity risk, foreign exchange risk.

Jean-Louis DELHAY, Chief Investment Officer

Jean-Luc MENARD, Head of the Convictions Team

1. Source: Groupe La Française as of 31/12/2024, applicable to S Share class - FR0013384971. Past performance is not a guide to future performance. 2. The EURO STOXX® Index is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland ("STOXX"), Deutsche Börse Group or their licensors, and is used under license. The fund is neither sponsored nor promoted, distributed or in any other manner supported by STOXX, Deutsche Börse Group or their licensors, research partners or data providers, and STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions or interruptions in the EURO STOXX® Index or its data. 3. Rating – Source – Morningstar, Inc. All Rights Reserved. Definitions and methodologies are available on the website www.creditmutuel-am.eu – Past performance is not a guide to future performance. 4. Reference to certain securities or financial instruments is provided for illustrative purposes. It does not have the objective of promoting direct investment in these instruments. The distribution of the Fund's portfolio may change at any time. This data is for illustrative purposes only.5. SFDR classification doesn’t guarantee funds’ performance.

Disclaimer

MARKETING DOCUMENT FOR PROFESSIONAL INVESTORS ONLY WITH REGARD TO THE MIFID DIRECTIVE (2014/65/EU)

For a full description of the risks and further information on the strategy and all fees, please refer to the current prospectus and key information document available in English on our website. The policy relating to customer inquiries and complaints implemented by Groupe La Française is available on our website. The asset management company may interrupt the distribution of the fund without notice. Non contractual information considered to be accurate at the date of publication and likely to change over time.  Crédit Mutuel Asset Management: 128, boulevard Raspail 75006 Paris. Asset management company approved by the AMF under number GP 97 138. Société Anonyme (public limited company) with share capital of euros 3871680 registered with “RCS de Paris” under number 388 555 021 APE code 6630Z. Intra Community VAT: FR 70 3 88 555 021. Crédit Mutuel Asset Management is a subsidiary of Groupe La Française, the asset management holding company of Crédit Mutuel Alliance Fédérale. La Française AM Finance Services, an investment firm approved by the ACPR under number 18673 (www.acpr.banque-france.fr) and registered with ORIAS (www.orias.fr) under number 13007808 on 4 November 2016.