Portfolio Manager Update | HESPER FUND - Global Solutions

HESPER FUND – Global Solutions (*)

State: 04/11/26

Key points at a glance

• Global growth held up well, albeit with regional differences, underpinned by fiscal support and AI business investment despite stubborn inflation and geopolitical headwinds.
• The US-Iran conflict remains stuck with no end in sight, prolonging the Hormuz crisis.
• Major central banks kept rates on hold with varying guiding guidance. The dollar’s strength reversed as the Fed could not disguise its dovishness.
• Tech stocks failed to regain steam as big tech earnings disappointed cash flows deteriorated.
• In the eurozone, yield spreads widened as social turmoil in France weighed on a worsening fiscal situation in a fragmented Parliament ahead of next year’s elections.
• Brazilian assets plunged on Lula’s surprise win.
• The HESPER FUND – Global Solutions (T-6 EUR) rose 1.06% in October, as FX, commodities and a mild short duration stance paid off. Year to date the fund rose 4.02%.
• The HESPER FUND – Global Solutions kept a net short duration stance at -1.4 years, focusing on France and Italy, and reduced equity exposure to 27%. In FX, long dollar exposure was halved to 21% after the Fed’s policy meeting, and exposure to the Norwegian krone was reduced to 23% on profit-taking.

Huge AI investment raises payback concerns

Despite very serious geopolitical challenges and conflicts, higher fuel prices and rapidly shrinking fiscal space, global growth continued to hold up, albeit with regional differences, and recession remains off the table.

Energy prices continued to hover at high levels as the war in Ukraine and the Middle East conflict show no sign of easing. 

Most major central banks kept rates steady but are mulling hikes at upcoming meetings. Ahead of the midterms, the Fed’s Warsh affirmed his commitment to price stability but kept rates on hold amid accelerating inflation and sustained growth, halting the dollar strength.

Global tech rout deepened as US earnings stoked AI spending fears, sparking a rotation in favour other sectors and regions.

Calm has returned to the US Treasury market as the tech rout drove money to safe havens. France, however, is now under pressure to rein in its derailed fiscal trajectory as activity slumps and inflation accelerates amid social discontent and political deadlock.

Convulsed after Lula’s unexpected election win, Brazilian assets dragged down regional stocks and bonds.

Monthly performance and current positioning

The HESPER FUND – Global Solutions (T-6 EUR) rose 1.06% as currency bets on the dollar and the Norwegian krone paid off. The fund offset the plunge in Latin American stocks and Argentinian bonds with commodities and Swiss stocks. Total assets rose 2.4% to €50.3 million. Annualised volatility over the past 250 days fell to 7.89%, while the annualised return since inception edged up to 3.86%.

Over the month, the fund reduced risk across all asset classes as the macro situation remains unclear following the Democrats’ sweep of both the Senate and the House in the midterm elections. We trimmed the short duration stance, focusing on France and Italy, and cut equity exposure by closing open long contracts on S&P 500 and Nasdaq futures, reducing overall equity exposure to 26.5%. In FX, we first reversed the short position on the dollar, going long 40%, and the halved down to 20%. Long exposure of 33% on the Norwegian krone was partially reduced to 23% to take profits as the currency continued to strengthen.

Outlook: France took a step forward towards the cliff

The sharp shift in US economic, political, military and geopolitical policy culminated in the messy conflict with Iran. The global economy weathered major trade and energy shocks over the past two years thanks to a loose fiscal stance, an ongoing AI investment boom and market discipline that forced the Trump administration to shelve its most stagflationary policies.

France’s rising yield premium is justified. The debt snowball effect is not far off, with 60% of bonds held by foreign investors, debt at 120% of GDP and interest expenses surpassing defence expenses. With French yields trending higher, replacing maturing bonds with more expensive ones to finance a 5% fiscal gap makes a blow-up just a matter of time.

Overall, the HESPER FUND – Global Solutions maintains a constructive stance on equities, with a selective approach across regions and sectors. With limited fiscal space and debt at dangerous levels and a less certain inflation outlook, we remain cautious about sovereign bond yields in specific countries, keeping a short duration stance at -1.4 years. In FX, we have halved the long exposure to the greenback and reduce the exposure to the Norwegian krone.

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