Aperture European Innovation - Q1 2026 Manager Commentary

The first quarter of 2026 began with exceptional momentum and ended under the shadow of war. European equities opened the year with a powerful January rally. Semiconductors led from the starting block, Defense stocks surged, and cyclical sectors outperformed across the board. By late February, however, the coordinated US-Israeli military operation against Iran, including the assassination of Supreme Leader Khamenei and a stated objective of regime change, abruptly reshaped the investment landscape. Iran’s subsequent closure of the Strait of Hormuz on 4^th March triggered what the International Energy Agency has called the largest supply disruption in the history of the global oil market.

Against this dramatic backdrop, the Aperture European Innovation Fund delivered a net return of +4.15%, outperforming its benchmark by 509 basis points¹. The bulk of the alpha was generated in January, driven by Stock Selection in Semiconductor Equipment and Defense sectors. In March, as equities sold off sharply, the fund’s outperformance held, in our view a testament to deliberate portfolio construction that for the most part avoided or minimised exposure to the sectors most exposed to the Artificial Intelligence disruption and war dislocation.

 Artificial Intelligence (AI), we believe, remains the dominant structural force shaping global markets, but the narrative is maturing rapidly. The AI revolution is no longer about whether it works: it is about which side of the disruption curve you sit on. Block’s decision to cut 40% of its workforce as part of an AI-driven restructuring could be a harbinger of what lies ahead for software and fintech companies. Coding, as a human activity, is being substantially displaced by AI agents. Our exit from SAP and Logitech early in the quarter reflects our view that the “AI loser” theme is not a valuation scare but a structural earnings risk. Conversely, the semiconductor equipment makers building the AI logic and memory chips the world needs (e.g. ASML, ASM International, BE Semiconductor) delivered what we believe to be, exceptional returns and we believe remain at the centre of a multi-year supercycle still in its early innings.

The Iran conflict has introduced an energy shock of historic proportions, and we approach its implications with eyes wide open. Eight weeks into the conflict, we acknowledge that this episode is proving more persistent than historical precedent would suggest. As Sir Alex Younger, former Chief of MI6, has observed, the US likely underestimated the cohesion of the Iranian regime – having grabbed the tiger’s tail, it cannot let go without being bitten, unless the regime falls apart. A deal will be necessary. The risks are asymmetric: while we believe the conflict will ultimately resolve, the landing point is likely worse than the starting point, with oil carrying a more enduring risk premium.

Portfolio construction for the European Innovation Fund we believe reflects this duality: conviction in structural winners alongside respect for the risks. Our Semiconductor positions are intended to capture the acceleration of the AI infrastructure buildout. Telecoms and Utilities are intended to provide defensive cash flow resilience. Energy holdings serve as a direct inflation hedge. Defense positions reflect the Geopolitical reality. As European equity dispersion remains elevated (a defining feature of the past eighteen months rather than just this quarter) we continue to believe that disciplined, conviction-driven Stock Selection will be the primary source of differentiated returns.

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