Charles-Edouard Bilbault
Global Equities Portfolio Manager
“Frugality includes all the other virtues.” Cicero
February macroeconomic data displayed stronger-than-expected inflation figures with US labor market and retail sales above market expectations. Post-covid Chinese economic reopening with latent economic stimulus in late 2022 fueled again global M2[1] growth acceleration. In that context, sturdier monetary policy tightening and lengthening of Central Banks’ hawkish stance indicating higher terminal rates for a longer period of time will be required to fully ensure price stability. This resulted in an ongoing equity market repricing under an increase in cost of capital and weighed naturally on overall sentiment towards risk assets. Digital assets investment products endured minor outflows with US$6.8m, slightly reversing positive January trend recording US$117m net inflows[2].
In this context, the portfolio partially retraced over last month returns and bore higher volatility in February[3]. Fourth quarter 2022 earnings rewarded companies which generated better than expected financial results. Overall portfolio companies managed to positively surprise on profitability profiles thanks to stringent cost management, as many of them are already facing a recessionary environment. We remain convinced that the year will be marked by positive operating leverage for many growth companies. These compagnies have rightfully repriced in 2022 from a multiple perspective by entering a downward earnings revision cycle ahead of the overall economy and, most importantly, by adjusting corporate strategies to more frugal spending accordingly. We continued to actively manage our equity exposure and trimmed outperformers to consolidate post-earnings some core holdings. Equity holding at the end of February was 97.9%[4].
Aside from market volatility, blockchain technology adoption continued in February. Paris welcomed more than 10,000 participants[5] to the second edition of the NFT Paris event hosted at the Grand Palais Ephémère. Visitors could enjoy digital art displays with generative art on the prime scene and assist to panel talks with representatives from global major consumer companies, including Chanel and Shopify, discussing Web3 strategies and how to use it to enhance customer engagement and experiences.
Industry news to watch
Announcements by established companies of blockchain based innovations continued to pertain to various sectors of the economy and enterprise use-cases. Among many others :
- Amazon to launch NFT initiative this spring[6]. The e-commerce giant follows the steps of other large consumer companies stepping up to Web3 digital market like e-Bay, which acquired NFT platform KnownOrigin[7]. This resonates with large scale NFT programs generating substantial revenue streams for companies like Nike (more than US$185m), Dolce & Gabbana (US$25m), or Tiffany (US$12m)[8] to cite a few.
- Siemens issues first digital bond using blockchain[9] (EUR60m amount, one year maturity). “[…] We can execute transactions significantly faster and more efficiently than when issuing bonds in the past” said Peter Rathgeb, Corporate Treasurer at Siemens. Bond issuance using blockchain is gaining traction, likely namely encouraged in Europe by public sector European Investment Bank (EIB), who issued a second EUR100m bond[10] using blockchain last November, with Goldman Sachs Bank Europe, Santander and Société Générale.
- BMW to use blockchain-tracked sustainable aluminum from Rio Tinto[11]. Thanks to which, BMW aims at an ambitious 70% potential CO2 emission reduction. Blockchain capacity to generate verified audit trails makes the technology particularly interesting for players in the need of supply chain probatory evidence to certify products[12].
