Chahine Capital once again rewarded at the LSEG Lipper Fund Awards

Luxembourg, April 22th, 2025

We are delighted to announce that Digital Stars Europe Smaller Companies fund has won three LSEG Lipper Fund Awards 2025 in France, Germany and Austria. The granted awards recognize the performance of our “Momentum” equity strategy over time.

The awards are the following:

• LSEG Lipper Fund Award France 2025: Digital Stars Europe Smaller Companies Acc, “Best Fund Equity Europe Small & Mid Cap over 5 years” (out of a universe of 95 funds)
• LSEG Lipper Fund Awards Germany 2025: Digital Stars Europe Smaller Companies Acc, “Best Fund Equity Europe Small & Mid Cap over 5 years” (out of a universe of 81 funds)
• LSEG Lipper Fund Award Austria 2025: Digital Stars Europe Smaller Companies Acc, “Best Fund Equity Europe Small & Mid Cap over 5 years” (out of a universe of 60 funds)

Digital Stars Europe Smaller Companies

These awards demonstrate the relevance of our differentiating approach, and our ability to generate robust outperformance over the long term. Digital Stars Europe Smaller Companies fund, launched in December 2016, has a 5-year delivered annualised performance of +16.9%, compared with +10.6% (Acc Retail share class as of 31/03/2025) for the MSCI Europe Small Cap NR.

Our quantitative “Momentum” equity strategy consists in identifying, within very broad investment universes, companies likely to surprise the market positively and repeatedly. Portfolios are built dynamically, in line with economic cycles.

“In an environment where some are questioning active investment, the systematic, disciplined, high tracking-error approach successfully implemented by Chahine Capital’s team for over 25 years is proving its added value for long-term equity investors,” says Charles Lacroix, CEO at Chahine Capital.

A regularly awarded strategy

Digital Stars Europe Smaller Companies and Continental Europe funds have received 19 LSEG Lipper Fund Awards over the last 6 years (2019-2025), in the best fund over 3, 5 and 10-year categories.

These distinctions testify to our expertise and commitment to offering our investors high-performance strategies adapted to different market conditions.

About Chahine Capital: www.chahinecapital.com

Chahine Capital is an independent Luxembourg investment management company. Since 1998, it has been a pioneer in quantitative momentum investment applied to European and US equity strategies. Thanks to its unique approach combining research and innovation, the company is the founder of the “Digital Funds” SICAV, which for over 25 years has offered one of the best risk-adjusted performance records in the industry. Chahine Capital’s research and investment team of expert engineers develops algorithmic models with a view to continuous improvement, in order to wining at identifying the stocks that will outperform the market. Chahine Capital is a member of IRIS Finance International Group and is based in Luxembourg and Paris.

WARNING

It is the responsibility of the reader to evaluate and assume all risks associated with the use of the information contained herein, including the risk of reliance on the accuracy, completeness, security or usefulness of such information. The contents of this document are for information purposes only and should not be construed as advice – financial or otherwise – or as an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction in which such an offer or solicitation would be unlawful. Please refer to the Digital Funds prospectus and key information document before making any final investment decision. All information expressed in this document at the date of publication is subject to change without notice. The opinions or statements contained herein do not represent the opinions or beliefs of Chahine Capital. Chahine Capital and/or one or more of its employees or editors may hold a position in any of the securities mentioned in this document.

DISCLAIMER LSEG 

The LSEG Lipper Fund Awards, granted annually, highlight funds and fund companies that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The LSEG Lipper Fund Awards are based on the Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over 36, 60 and 120 months. The fund with the highest Lipper Leader for Consistent Return (Effective Return) value in each eligible classification wins the LSEG Lipper Fund Award. For more information, see lipperfundawards.com. Although LSEG makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, their accuracy is not guaranteed by LSEG Lipper.

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After the downturn that began in October 2023, European and US equity markets continued to rise in 2024, buoyed by strong trends. At the end of December, the MSCI Europe NR posted a 2024 performance of +8.6% (EUR) and the MSCI USA NR +24.6% (USD).

Against this backdrop, all Digital Stars strategies outperformed over the year, benefiting from sustainable trends in several market segments that had been identified in advance.

 

Annualised performance of Digital Stars funds

Risk indicator: 5/7

Digital Stars Europe:

Throughout 2024, the fund benefited from good stock picking, supported by portfolio positioning in line with underlying market trends. The overweighting of financials and industrials, as well as the underweighting of consumer discretionary (particularly luxury goods) and consumer staples, contributed positively to the fund’s outperformance, echoing a favourable year for value and cyclical growth.

Digital Stars Continental Europe:

Like Digital Stars Europe, the fund benefited in 2024 from good stock picking, underpinned by portfolio positioning in line with underlying market trends. The overweighting of financials and industrials, as well as the underweighting of consumer discretionary (particularly luxury goods) and consumer staples, contributed positively to the fund’s outperformance, echoing a favourable year for value and cyclical growth.

Digital Stars Eurozone:

The fund benefited from a good selection of stocks throughout 2024, and a well-oriented positioning. The main individual contributors are to be found among finance, industry and technology. For the fund’s positioning, it was mainly the strong underweighting of the year’s three worst sectors that helped make the difference: consumer staples, energy (the fund’s reinforced ESG policy led to no stocks in this sector in 2024) and materials.

Digital Stars Europe Smaller Companies:

The year was marked by excellent stock picking for the fund, and a relatively neutral positioning versus the index. The best performance contributors were mainly financials and construction-related stocks. Conversely, specialised retail stocks penalised the strategy.

Digital Stars US Equities:

The year was marked by an excellent selection of stocks, which took particular advantage of the tense but decisive US election environment. Our technology stocks contributed most to outperforming the US market.

Focus on Digital Stars Europe

Throughout 2024, the fund benefited from a good stock picking, supported by a well-oriented positioning in value and cyclical growth styles. Finance was the winning sector of 2024, buoyed by a favourable interest-rate environment. The fund’s overweighting of financials worked in its favour, particularly Banks. Some of our banking and financial stocks have also benefited from a climate conducive to mergers/acquisitions, whether for real takeover operations or mere rumours (BPER, Banco de Sabadell, ANIMA Holdings, BPM). Industry is also one of the market’s winning sectors. Our overweight industrial stocks benefited from trends in Defence (Kongsberg) and Construction in the broadest sense (Konecranes, Prysmian). This construction theme was also reflected in strong contributions from cement manufacturers (Buzzi, Titan Cement). The good performance of the Consumer staples stocks in portfolio (Greencore) combined with our underweight in the sector made a very positive contribution in relative terms. On the other hand, Real Estate weighed on the fund’s performance, due to its overweight, as did IT.

The pro-cyclical environment of 2024 did not particularly favour Small caps, contrary to market expectations. However, despite our overweighting of Small and Mid caps, the strategy succeeded in outperforming all market segments, thanks to stock picking that took advantage of underlying market trends.

 

Digital Stars Europe performance attribution vs. MSCI Europe, by GICS sectors

 

Portfolio dynamics

Positioning of Digital Stars Europe vs. MSCI Europe

Dyn.* : Dynamic rebalancing over 6 months.

During the first half of the year, the model gradually reduced the allocation to value stocks, mainly Banks, in favour of Cyclical growth stocks. In the second half of the year, finance was reinforced in the portfolio rebalancings, but in a more balanced way between banking, Financial services and Insurance. The proportion of Value stocks is back in line with that of the index, while the underweighting of Quality/Visibility stocks has been reduced and the overweighting of Growth stocks reduced.

Breakdowns are not constant and change over time.

From a factorial perspective, the ‘Quality/Visibility’ style is generally the opposite of the ‘Value’, relatively to the market. Consequently, being underweight Quality/Visibility has enabled the fund to be positively sensitive to the Value trend that has dominated the market this year.

Sector wise, this stylistic positioning translates into a clear overweighting of the Financial and Industrial sectors, and an underweighting of Healthcare (especially Pharmaceuticals) and Consumer Staples.

The strong overweighting of Italy was maintained throughout the year, as was the significant underweighting of France. The UK was significantly reinforced in the second half of the year, and now represents the second-largest geographic overweight.

Finally, our Economic momentum indicator still places us in a pro-cyclical regime, a priori more favourable to Small- and Mid-cap stocks than to Large ones. The fund’s « All market-cap » selection was therefore still based on a logic of equal weighting of the stocks entering the portfolio in this market phase. This led to an allocation currently well spread-out across the entire spectrum of market caps. However, our Economic Momentum indicator is approaching its counter-cyclical tipping point, which could occur in the first half of 2025. This counter-cyclical shift would have the effect of attenuating the portfolio’s underweighting of the index’s largest caps, as remaining too underweight in giant caps would represent a major active risk in this type of macro-economic context.

Strong stylistic, sectoral and geographic trends benefited the Momentum factor as implemented in our Digital Stars strategies, which significantly outperformed over the year. We will now attempt to analyse the drivers which we believe will be decisive for the behaviour of the European and American Equity markets in the first half of the new year.

 

Heading for the final phase of the stock market expansion cycle?

2024 will remain a good year for equity indices (MSCI Europe NR +8.6%, MSCI USA NR +24.6%), and more importantly, will have marked a salutary break with the years  -2023 dominated by a lack of visibility.

The main event of 2024 was the initiation of an accommodative monetary policy by Central Banks, in June for the ECB and September for the Fed, which had already been anticipated in the 2nd half of 2023, a sign of renewed macro-economic visibility.

The year 2025 looks set to be a pivotal one, during which investors’ gaze is likely to focus on the establishment of the Trump administration and its consequences for the global economy. Europe, with its low valuation and supported by rate cuts that are unlikely to weaken during the 1st half of the year, not seem to us to be devoid of opportunities for investors. As does the US market, where a majority of stocks remain fundamentally attractive.

More than ever in this changing context, we feel it is important to take a step back and rationally assess the situation in terms of our 4 traditional pillars of analysis.

Growth cycle still buoyant on both sides of the Atlantic for the time being

The first pillar of our analysis is Economic Momentum. Our proprietary Economic Momentum indicator, which is 12 months ahead of the real economy, remains at a high level in Europe, despite a slight consolidation since last Summer.

Source: Factset/Chahine Capital. Data as of 31/12/2024. Past performance is not indicative of future return. The Economic Momentum Indicator is a proprietary indicator that takes into account the latest releases of unemployment, retail sales, trade balance, GDP leading indicator, consumer confidence, PMI, economic confidence and industrial production.

In the US, our Economic Momentum indicator remains at a more neutral level than in Europe, while continuing to signal an expansive environment that should favour Equities.

Source: Factset/Chahine Capital. Data as of 31/12/2024. Past performance is not indicative of future return. The Economic Momentum Indicator is a proprietary indicator that takes into account the latest releases of unemployment, retail sales, trade balance, GDP leading indicator, consumer confidence, PMI, economic confidence and industrial production.

The environment therefore remains pro-cyclical, and the « Top-Down » consensus of economists expects robust growth in Europe and the USA over the next few years. While GDP growth in the Eurozone should reach +0.8% in 2024, an improvement is expected for 2025 (+1.0%) and 2026 (+1.2%). In the United States, although economists continue anticipate significant growth, the dynamic is less buoyant than in Europe.

 

This positive signal is likely to continue for several months yet. It should be remembered that the accommodative monetary pivots implemented by the major Central Banks since last June are the consequence of a positive phenomenon, that of winning the battle vs. inflation. This is in stark contrast to recent historical precedents, when accommodative measures were initiated to save a state in near-bankruptcy or rescue an exsanguinated financial sector. This is a finding that will support our next economic releases and our Economic Momentum indicator. The massive fiscal stimulus plan announced in China will also be a factor of support in the months ahead. However, we cannot rule out the possibility that this cyclical signal, which has been buoying Equities in Europe for 21 months now, will be reversed in the course of 2025. Since 2003, the longest expansive cycle as revealed by our indicator is 25 months (twice observed: July 2012 to August 2014, then November 2019 to December 2021).

More accommodative monetary policy in Europe than in the United States

As expected, the ECB and the Fed began their accommodative monetary pivot in autumn 2023. Rates were cut by 100 basis points on both sides of the Atlantic. The ECB should maintain this sustained pace in the first half of 2025 in order to bring its key rate close to 2.0%, close to the level of inflation. It is a different story in the US at this stage. Inflationary fears linked to the election of Donald Trump have led to a significant reassessment of the prospects for rate cuts. A single 25-basis-point cut in the US policy rate is now expected in the first half of the year, bringing it close to 4.25%. However, inflationary fears linked to Trump’s election seem exaggerated to us. Economic protectionism and fiscal accommodation are certainly inflationary, but that is forgetting the election promise to cut the price of oil by a factor of 2. On the other hand, we cannot rule out putting pressure on the Fed to adopt a more accommodative policy. A key rate of 4.25%, with US inflation currently at 2.7% (and a 1-year break-even inflation rate of 3.0%), means that real rates would be maintained at between 1.0% and +1.5% (vs. 0% in Europe), a level probably deemed too restrictive by the next US executives.

Attractive valuations in Europe, excessive for « traditional » American market-cap-weighted indices

The European market remains undervalued by historical standards. The prospective 12-month P/E of the STOXX Europe 600 index stands at 13.3x vs. a 14.0x average since 2000. This is even truer for the Small and Mid-cap segment (12.7x vs. average 14.7x).

 

Moreover, the bottom-up financial analyst consensus has stabilised over the past few months, highlighting a virtuous context for valuations at this stage: the « time effect » is once again favourable. Expected earnings growth over the next 12 months is +8.2% for the STOXX 600 index, which means that with a stable market, the P/E falls by 0.10 each month. Virtually, the P/E of the European index would be below 13.0x at the end of the half-year if the market were to remain at its current level.

The same cannot be said of the United States. Clearly, the valuation of the S&P 500 appears excessive. It stands at 21.6x, against a historical average of 16.7x, due to the index’s heavy concentration on overvalued stars. Interestingly, the « Equal weight » version of the S&P 500 is not overvalued (P/E 16.5x vs. average of 16.0x), while the « Small and Mid » segment is slightly under-priced by historical standards (MSCI USA Small Cap P/E +18.8x vs. average of 19.2x). The high valuation of the US market is therefore a trompe-l’oeil that needs to be put into perspective.

 

Stay invested for the coming months

After a rise of almost +70% in the US index and +40% in the European stock markets in just over 2 years, it may seem legitimate to question the sustainability of the current stock market rally. However, we believe that it is still too early to reduce strategic exposure to Equities.

Our Economic Momentum indicator continues to signal a favourable environment for Equities on both sides of the Atlantic. Monetary accommodation by the ECB, far more powerful than that anticipated for the Fed at this stage, is unlikely to falter, at least in the first half of the year. All the more so as the Fed may surprise. With the exception of the highly concentrated S&P 500 index, valuations do not reveal any excesses, or even an undervaluation of the Small and Mid-cap segment. Seasonality remains favourable until May.

A favourable context for the alpha of our active Momentum strategies

The Momentum factor has historically demonstrated its ability to generate outperformance over time horizons suited to equity investment.

This is due to Momentum’s ability to adapt to changing market environments.

Of course, the downside is that over shorter time horizons, Momentum can underperform, particularly during powerful stylistic regime shifts. This is what happened between 2020 and 2022 for the MSCI Europe Momentum index,  following the European market’s profound stylistic shift towards Value. The good recovery of the factor since then is an excellent signal for its future prospects.

Momentum is not intended to be « timed« . However, it may be appropriate to take a long-term position on this factor after observing a significant relative drawdown.

Over a 5-year time horizon, corresponding to the recommended minimum investment horizon for Equities, it is extremely rare for the Momentum factor to underperform.

 

The Momentum implemented in our Digital Stars strategies feeds on trends. The longer these trends last, the better for our active investment approach.

In this respect, the installation of a new, disruptive administration in the United States should be seen as an opportunity and a potential source of alpha for our medium/long-term strategies.

Active bets adapted to the current context

For the coming months, we feel that the current relative positioning of our strategies is perfectly suited to the context and the current cyclical and fundamental analysis outlined above.

In Europe, the Digital Stars Europe fund currently adopts a relative pro-cyclical positioning, tending to be Value-oriented and overweight the Small and Mid caps segment.

Our top sector bet remains Finance. Banks are pro-cyclical in relative terms, and should continue to be buoyed by the further steepening of the yield curve, to which they are highly sensitive. Moreover, despite the sector’s sharp rise in 2024 (STOXX Europe Banque at +26.0% ex-dividends, best 2024 sector in Europe), it remains the cheapest sector on the European market, at a steep discount to its historical valuations (STOXX Europe Banque: PER 7.2x vs. a 10.4x average since 2000).

We also see the Value bias as a potential source of alpha in the months to come. It is the only fundamental style currently undervalued by historical standards, despite outperforming the Growth style significantly over the past 4 years.

 

Finally, the current Small- and Mid-cap bias is perfectly suited to an environment that remains pro-cyclical, in which a powerful accommodative monetary pivot is being implemented. All the more so as this segment of the European market remains significantly undervalued by historical standards.

It is also important to bear in mind that in the event of a switch to a contra-cyclical regime (not to be ruled out in 2025), the weighting of the Small and Mid-caps segment would be halved in our All-caps funds, following the new portfolio construction approach introduced in 2024.

Digital Stars US Equities: exposure to the US market while mitigating concentration risk

Our US investment solution combines a number of advantages. Of course, the depth of its investment universe (2700 stocks) and the high dispersion traditionally observed within it are conducive to Momentum stock-picking. Moreover, the portfolio’s equal weight approach enables investors to gain exposure to the US equity market, while sharply limiting the risk of concentration in a few overpriced stocks.

 

Is quantitative investment necessarily a « black box »?

Analysis by Charles Lacroix, CEO of Chahine Capital for H24 Finance.

 

Despite a history spanning several decades and a significant place in the portfolios of Anglo-Saxon institutional and retail investors, quantitative investment is still relatively marginal in the allocations of their European counterparts, even though it has been gaining ground in recent years.

Indeed, quantitative investment, with its systematic, disciplined approach based on pre-defined investment rules and limits, and its ability to exploit vast quantities of data, seems increasingly well suited to a world where, for many players, too much information now kills information…

And yet, when the teams at Chahine Capital, who have been implementing a systematic “Momentum” equity strategy for over 25 years, talk to investors, we often hear the term “black box” thrown around.

 

How can we explain this discrepancy between some investor’s perception of quantitative investment and what it actually is?

There are several possible explanations:

 

1) A multi-factorial approach sometimes difficult to grasp for the non-specialist

The added value of quantitative investing lies in the identification and exploitation of proven factors or risk premia whose persistence has been demonstrated both academically and empirically (“Growth”, “Value”, “Momentum”, “Quality”, “Low Volatility”, “Carry”, to name but a few).

To improve the robustness of their strategy, and given that no single factor works all the time, however attractive it may be over the long term (think of the “Value” factor between 2007 and 2021, i.e. for almost 14 years!), many quant investment managers will tend to diversify the risk of their overall portfolio by aggregating different factors or risk premia.

The disadvantage for the non-specialist investor is that, while he or she may be able to understand how each of these factors works in isolation, it will be very difficult to grasp their interactions and, above all, to anticipate how a multi-factor portfolio will behave in a given market scenario.

One of the strengths of the Momentum factor, which consists in identifying and exploiting the persistence of upward trends in certain stocks, is its adaptability to different market regimes: it simply goes where the market goes, without any structural sector or style bias. As such, it is probably one of the only factors that can be efficiently implemented on its own, making it easy to understand, even for investors who are not specialists in quantitative matters.

 

2) More or less intuitive factors

While some factors, such as Momentum, are highly intuitive, for the reasons outlined above, others, such as Low Volatility or certain risk premia, such as Carry trade, can be more difficult to pin down.

The determinants of a Momentum strategy’s performance potential are easy to grasp: a visible environment will favor the emergence of trends, while repeated geopolitical shocks or emergency interventions by Central Banks will probably cause the market to temporarily forget fundamentals, or lead to damaging sector rotations.

Conversely, the sudden increase in volatility on a currency pair (e.g. Yen-GBP), which is costly for a FX carry strategy, may have escaped the investor’s notice if his eyes are not permanently riveted to his Bloomberg© screen, making it more difficult for him to judge its suitability for a given market scenario.

 

3) A varying degree of transparency

While the disciplined and rigorous application of clear, pre-established rules greatly facilitates the transparency that most investors demand, and objectifies investment decisions to a greater extent than discretionary investment managers can, it must be admitted that some systematic managers are reluctant to go into detail about the strategies they implement, or to disclose their portfolios at regular intervals.

There’s probably a touch of paranoia behind this reflex: “If I say too much, some competitors might be tempted to copy me, and I risk losing my competitive edge”. Nevertheless, the indispensable and costly human resources, in the form of highly specialized researchers, and material resources, in the form of investment in data and IT tools, create strong barriers to entry, leading us to believe that this “risk” is greatly overestimated by the quantitative investment industry.

On the contrary, many systematic managers, among which Chahine Capital, have chosen to draw on their expertise in analysis and information retrieval to offer greater transparency on their strategies, ongoing research and results, in order to eliminate any surprise effect for their investors. This makes it much easier for investors to report the results of systematic strategies to their end-clients.

 

4) “White-box” quantitative investment

In conclusion, the prejudice against “black box” quantitative investment seems to us to be mostly unjustified. Provided that it is implemented using readable, intuitive factors, and that systematic investment managers are sufficiently didactic and comply with the now indispensable exercise of transparency, it seems to us to be the best illustration of Nicolas Boileau’s famous maxim (1636-1711): “What is well conceived is clearly stated, and the words to say it come easily”. In short, the very definition of “white box” investment…