Aperture European Innovation - Q1 2025 Manager Commentary
In Short
Aperture European Innovation Fund: Commentary for Q1 2025
Quarter in review
The first quarter of 2025 was nothing short of a regime shift. The U.S. market underwent a sharp and relentless selloff, with the S&P 500 declining -5% in USD terms and over -8% in EUR terms. In contrast, Europe defied the global malaise with MSCI Europe Net TR Index (“MSCI Europe” Ticker: MSDEE15N Index) rising +6%, marking a rare and powerful outperformance versus US equities. The market's aversion to uncertainty was front and centre, and we had that in abundance: a disorderly unwind in some of the most crowded parts of the market, notably AI, data centre and power/electrification names courtesy of Deepseek, restrictive U.S. fiscal policy and geopolitical tremors.
U.S. fiscal policy has become a headwind for growth. Tariffs — functioning as a de facto 10–25% consumption tax — are being wielded as both a geopolitical tool and a revenue source. Meanwhile, the Department of Government Efficiency (“DOGE”) has embarked on cost cuts across the board, often indiscriminately. The underlying hope is a tightrope act: reduce spending and deficit, monetise debt via lower rates, and engineer a soft landing. But this is a delicate balancing act, especially as the market continues to digest a potential reset in terminal Fed Funds rates and a long end potentially anchored between 3.25–4%; what if the inflation outlook challenges this assumption?
