By Frederic Lejoint.

Since Russia's invasion of Ukraine, questions of European sovereignty and strategic autonomy have moved to the top of the political agenda, culminating in the infrastructure plans announced in many countries over the past year. Against this backdrop, Allianz Global Investors is proposing a strategy that specifically targets European companies that should benefit from these efforts over the next few years. We recently had the opportunity to meet Christophe Hautin, the manager of this up-to-the-minute thematic strategy.

European measures

In practice, this fund dates back to 2023. "We had already been involved in the conflict in Ukraine for a year, and the geopolitical stakes were becoming ever higher. The emergence of the theme of European sovereignty has begun to provoke growing interest among investors". Christophe Hautin points out that these issues do not date back to the Russian invasion, and have taken different forms in the past, notably during the covid pandemic when many European countries experienced difficulties in obtaining supplies of masks or vaccines. "At the time, we were already aware of the vulnerability of our businesses and economies.

Since then, a number of programmes have been voted through (Repower EU, Chip Act, etc.), setting out a clear political agenda for the European Union. "There is also a directive currently being negotiated on the issue of digital sovereignty, at a time when 75% of listed European companies still depend on the US GAFAs for their IT needs. At this level, there are real questions of sovereignty that need to be addressed". While some European countries have the budgetary room to finance these plans, public money alone will not be enough. "Private capital will have to be mobilised, and a fund like ours is part of this effort to ensure European sovereignty. It's clearly a buoyant theme that investors are interested in".

Support

"Our strategy was initially launched in March 2024 for the French market, taking into account the major technological challenges facing Europe, particularly those related to the semiconductor industry. It has seen strong growth in assets under management, which now stand at €350 million, mainly for individual customers.

Christophe Hautin points out that this strategy is mainly invested in technology or innovative companies, and that one of the problems of this segment is the difficulty for promising start-ups to find financing when they start to grow. "We have talent in Europe, but we also have a real problem of support and loss of innovation when they start to grow and look for external sources of finance to fuel their growth. The Draghi report of 2024 highlighted this problem very well, and this fund is one way of responding to this challenge".

Small and medium-sized

The fund has a majority exposure to European companies with this strong innovative and technological dimension, with a strong approach in terms of fundamental selection of the various stocks in the portfolio. The investment universe includes 800 stocks, many of them small and mid caps "where Europe has a wealth of very specific expertise, and this pocket currently represents around 20% of assets under management".

"Our aim is to be invested in the current European leaders, but also to gain a foothold in the future champions. Christophe Hautin notes the clear rebound in this asset class since the beginning of 2025, with investors returning to this segment of the market against a backdrop of accommodating monetary policy and support measures that will mainly benefit these companies. "Valuations are still attractive after several years of underperformance".

Diversification

In sectoral terms, Christophe Hautin believes that sovereignty encompasses Europe's ability to be strategically autonomous from other regions, and covers a much wider area than defence, including the green transition (electric mobility, circular economy, energy efficiency), cyber security, health, robotics, reindustrialisation, aerospace and the digital transition. This diversified sectoral approach also allows us to diversify our exposure across around seventy lines, and to take a balanced approach to risk management by not being exposed to the underperformance of any one sector.

Defence has been a buoyant theme since the fund was launched, but Christophe Hautin stresses that he is not blindly investing in this sector. "It represents around 15% of our assets under management, which is quite a significant overweight compared with our benchmark index. However, we do not invest in producers of controversial weapons (biological weapons, nuclear weapons, anti-personnel mines, etc.) for obvious reputational reasons. We then apply our ESG approach by looking at the profiles of companies in the aerospace and defence sector, paying particular attention to specific governance risks (compliance with sanctions, corruption, etc)".

Financial sector

Finally, the financial sector should also be at the heart of the redistribution of investment flows. "Europe needs major financial groups that can finance growth and are no longer dependent on American banks". It also points to developments to ensure security of energy supply in Europe by linking renewable electricity production centres to urban centres, a plan that will require huge investment (€600 billion) over the next five years. With this in mind, it is hardly surprising that Elia is one of the stocks in the portfolio with exposure to this theme.

In geographical terms, the fund is mainly exposed to the eurozone (80-90% of assets), with some diversification into other European countries. "Since the beginning of the year, we have reduced the specific risk on the French market, even though most of our portfolio companies are international and generate a small proportion of their sales in France.”