FFM Fund Newsletter - Mar 2026

March 2026

Dear Friends, Dear Investors,

Recent developments, particularly in the Middle East, have significantly altered the market environment in just a few days, pushing into the background dynamics that were still central to our previous letter.

In our last communication, we highlighted the sharp acceleration in investment related to artificial intelligence, driven by major technology players. This trend has not slowed. On the contrary, it continues to shape markets in a profound way, with ever-increasing levels of capital expenditure and intensifying competition among hyperscalers. This race, whose profitability remains uncertain at this stage, is unfolding within what we would describe as a phase of growing excess, where capital allocation discipline may increasingly become a key differentiating factor.

Over the past few weeks, however, another factor has emerged abruptly: rising geopolitical tensions in the Middle East, and more specifically the blockade of the Strait of Hormuz. Without claiming geopolitical expertise, certain economic realities are difficult to ignore. The strait is a critical chokepoint for a significant share of global energy flows. In the event of a prolonged disruption, up to 15 million barrels of oil per day could be removed from the market, approximately 15% of global consumption, with additional implications for natural gas and key commodities such as fertilizers.

At this stage, markets appear to be pricing in a relatively swift normalization scenario. Prices implicitly reflect the assumption of a short-lived conflict and a gradual resumption of trade flows. However, this apparent stability rests on significant uncertainties, particularly regarding the strategic objectives of the parties involved and the ability to sustainably secure the zone.

As is often the case, investors tend to focus first on the immediate impact before reassessing second-order effects. Volatility could therefore increase as these effects gradually feed through the economy, notably via growth, inflation and monetary policy. This type of shock is not linear: the longer it persists, the more its consequences amplify and spread, potentially leading to meaningful disruptions across the global economy. Our approach, however, remains unchanged: investing in high-quality companies capable of generating long-term value.

At the same time, we have progressively begun, since the end of last year, to adjust part of our allocation in order to reflect what we believe to be a deeper structural shift. After more than a decade of underinvestment, the need for “real” assets, energy, electricity, infrastructure, is becoming critical in an increasingly deglobalizing world.

Within this framework, and independently of recent geopolitical developments, we have initiated a repositioning toward selected companies in the energy sector, particularly in oil. These businesses do not always fully meet our historical criteria, especially in terms of margins, but they currently offer attractive characteristics: reasonable valuations, solid returns on capital, and strong visibility supported by multi-year order backlogs.

In this type of setup, the analysis needs to be adjusted: cash generation and positioning in a structurally underinvested sector take precedence over certain usual standards. We believe this segment, still largely underowned by investors, could become a significant driver of performance in the years ahead, while also offering an attractive diversification avenue amid the surge in US technology stocks and artificial intelligence.

Best regards,

Your CaridaB Group Team