War Scenarios

Giordano Lombardo, Founder, CEO and Co-CIO Plenisfer Investments SGR

“No wind is favourable to the sailor who does not know which port he wishes to reach” (Seneca, Letters to Lucilio)

1. First quarter 2026 performance

2. War in Iran: a subdued market reaction so far

3. Two possible scenarios for the war. The risk of stagflation

4. Portfolio strategy

The first quarter of 2026 closed with the following fund performances^[1]:

• The multi-strategy fund Destination Value Total Return (USD share class) recorded a performance of -1.3% (annualised since inception +8.6%). The Euro Hedged share class rose by +0.3% (annualised since inception +7.6%); the Euro share class by +1.2% (annualised since inception +6.8%).

• The Destination Dynamic Income Total Return fund recorded a performance of +0.6% in Euro (annualised since inception +6.3%).

• The Destination Capital Total Return (USD share class) fund recorded a slightly negative return of -0.37% (annualised since inception +21.5%). The Euro Hedged share class declined by -0.45% (annualised performance since inception: +18.9%).

Past performance is not indicative of future results.

During the quarter the global equity index fell by 3.2% and the bond index by 1.1%^[2].

Following a positive start for the financial markets in the first two months of the year, the war in the Middle East quickly led to a rise in oil prices and a fall in share prices.

The March correction affected all three funds under management, which nevertheless mostly ended the quarter in positive territory, with the exception of the USD-denominated classes, which were slightly in the red.

An analysis of Destination Value’s performance shows that the dollar-denominated class’s negative result for the quarter was entirely due to exchange rate movements, whilst performance in local currency was positive. This is the opposite of what happened in 2025, when the USD performance benefited from the underweight position in the US currency.

Positive contributions came from the Special Situation strategies, both equity and fixed income, as well as the position in gold, despite the correction in this asset in March. The main negative contributors were the Compounders, and to a lesser extent the Macro Equity, Macro Fixed Income, and Income strategies. However, these were offset by the Hedging strategies, which performed particularly well in the latter part of the period.

Destination Dynamic Income benefited most during the quarter from the Special Situations strategy and the macro position in Mexican and Turkish equities. The steepening of the yield curve and the Income strategy had a negative impact.

Destination Capital recorded a slightly negative performance, both in USD and in local currency. The largest positive contributions came from positions in energy stocks, as well as from certain Special Situations. Financials and some of the Compounders, particularly those linked to Chinese technology, consumer goods and software, had a negative impact.

War in Iran: a subdued market reaction so far

The dominant factor of the quarter was the outbreak of war in Iran and the subsequent closure of the Strait of Hormuz, which pushed US petrol prices above $4 a gallon ^[3] and 30-year mortgage rates to 7%^[4]. The war with Iran also triggered a sharp rise in fertiliser prices, which in turn pressured food prices. Furthermore, the risks of disruption to supply chains for intermediate and final goods traded on international routes increased.

It is therefore unsurprising to see how markets reacted to the start of the war: falling share prices, rising bond yields, and even gold prices falling. It has been a very difficult quarter for all the main asset classes.

Looking more closely at the impact on interest rates, short-term rates (3-month US Treasuries) remained virtually unchanged over the month, whilst the yield on 10-year bonds rose by around 30 basis points^[5]. The bond market has therefore begun pricing in a persistent rise in inflation, due to the long-term effects on energy prices and potential bottlenecks in trade flows.

The correction in equity markets was, all things considered, modest, with the equity risk premium rising by around 40–50 bps^[6]. Corporate bond spreads also widened during the month, but only modestly (10 bps for BBB-rated bonds). Gold fell by 10%^[7] in March 2026, which is unusual in a crisis month, with sales likely driven by the liquidity needs of certain Middle Eastern operators most affected by damage to the region’s energy infrastructure.

The only exposure that allowed for diversification of equity and bond positions once the war began was that relating to energy securities, both equities and corporate bonds. Energy is currently the best-performing sector year-to-date, over one and five years, amongst those in the global equity market.

Uncertainties regarding the direction, duration and effects of the war remain unresolved and may even have increased at the start of the second quarter. Indeed, there are many questions that will need to be answered in the coming months: how long will the war last? What is the extent of the damage inflicted on energy and other infrastructure in the region? What will the economic and political landscape in the Middle East look like following the conflict?

Two possible scenarios for the war. The risk of stagflation

In line with the view that our role as portfolio managers is not to make macroeconomic or geopolitical ‘predictions’, but to ‘be prepared’ for different scenarios in terms of portfolio construction, we can outline two opposing scenarios regarding the resolution of the ongoing conflict and its consequences.

In an optimistic scenario, the war could end quickly (within days or weeks, rather than months), damaged infrastructure could be repaired swiftly, and the new Iranian regime could be viewed favourably by the rest of the world, allowing sanctions against the country to be lifted. In this case, oil prices are likely to fall rapidly, perhaps even below pre-war levels, as Russian and Iranian oil would be freely bought and sold.

In a scenario of widespread panic, however, the war would drag on for months, with lasting damage to infrastructure and supply chains; oil prices would likely remain high and perhaps even rise further; global trade would be severely damaged; and some Middle Eastern countries like the UAE that fostered a business- and tourism-friendly environment would struggle to find a new equilibrium.

In both cases, we can say that the war has shaken the status quo, with lasting consequences that go far beyond the price of oil. Capital flows from oil-rich countries, which until recently were channelled into a range of economic ventures, from AI start-ups to Premier League football clubs, are likely to be scaled back. Furthermore, funds earmarked for projects aimed at satisfying luxury consumption – from desert ski resorts to the construction of cutting-edge cities – will likely be redirected towards the construction of oil pipelines and the security of oil and gas transport.

Not to mention the effects on global politics; even if the war were to end quickly, there will almost certainly be lasting consequences for traditional alliances (NATO) and previous security agreements. In both cases, therefore, the risk of inflation rising to a higher level than the one prevailing before the conflict cannot be overlooked. In our end-of-2025 letter published on 15 January 2026, we identified inflation as the risk least ‘priced in’ by financial markets. Unfortunately, events in the Middle East have only served to increase this risk, to which is now added that of a slowdown in the global economy, again due to pressure from energy prices, which act as a sort of “global tax”: a scenario of stagflation.

Various inflationary indicators were already rising before the war started, partly due to the spread of tariff increases throughout the economy. It is now possible that various ‘supply-side’ factors (tariffs, reduced migration flows due to nationalist policies and energy shocks) will prolong the inflationary phase for longer.

These forces could, on the other hand, be counterbalanced by disinflationary pressures stemming from productivity, following the increasingly rapid adoption of AI across various economic sectors.

Taking the United States as an example, average hourly wage growth is at a five-year low and productivity gains have pushed unit labour cost growth below price inflation, a rare occurrence over the past decade. The growing adoption of AI is in fact leading companies to scale back their plans to hire new workers.

All this makes the task of central banks, starting with the Federal Reserve, far from easy. Most of the world’s major central banks currently appear to be adopting a wait-and-see approach. We expect this to continue at least until (and if) figures on growth and employment begin to show signs of a significant decline.

In addition to the issue of inflation, we must also bear in mind other (long-term) factors that are decisive for the global macroeconomic outlook:

1. The governments of major countries (the US, Europe, China) are pursuing expansionary fiscal policies.

2. The US’s twin deficits (current account and public deficit) continue to widen, increasing inflationary pressures and weakening the dollar.

3. Demand for arms and ammunition is structurally on the rise, driving up demand for raw materials, rare earths, metals and energy.

4. Energy security has become a key factor: most countries will seek to reduce their dependence on imported energy and make their energy networks more resilient, through more coal-fired power stations, nuclear power, or renewables. All of this requires capital, raw materials and the recruitment of workers in these sectors.

Portfolio Strategy

We can conclude from the analysis of the scenarios described above that the investment ‘environment’ in which we operate is shifting, in terms of risk balance, from a scenario of growth (driven by the adoption of new technologies) and balanced inflationary/deflationary pressures, to one of economic slowdown and heightened inflationary risks.

This is the worst-case scenario for portfolio construction, as traditional diversification between equities and bonds ceases to work. This is because the correlation between the two asset classes becomes positive, as in 2022.

So what should be done? At present, we favour a cautious approach, maintaining most of the hedges put in place during March, both in the credit market (CDS) and the equity market (index futures).

On the other hand, the possibility that the situation could resolve itself positively, even in the short term, means we cannot reduce our overall exposure to risky assets to minimum levels, so as not to miss out on opportunities during the recovery phase.

Despite the recent correction, the reasons for holding gold have not changed: the devaluation of major currencies (the ‘debasement trade’) and growing geopolitical uncertainties. On the other hand, following a multi-year bull market, gold is now expensive relative to other commodities, particularly oil. For these reasons, it continues to represent a structural component of our portfolio, but with a lower weighting than the historical average since the inception of our funds. For the same reasons (the debasement trade and rising public deficits), we maintain an ‘underweight’ position on the dollar, though to a lesser extent than in the recent past.

On the bottom-up front, we maintain exposure to the infrastructure side of the AI revolution (semiconductors and power grids). Furthermore, the recent indiscriminate sell-off in certain sectors ‘victimised’ by AI, such as software, offers opportunities worth exploring in our view.

Finally, our stock picking continues to favour “special situation” stories, and therefore involves less exposure to market direction. Our positions in small and mid-caps in Europe and Asia offer extremely attractive valuations.

In the corporate bond sector, we believe there is still value to be found in certain emerging market issuers, particularly in Latin America, and in “special situation” positions, especially within the energy sector.

Returning to Seneca’s quote at the start of this letter, which states that no wind is favourable to those who do not know the harbour they are heading for, we must remember that the Destination of our funds is not only to achieve the return targets we have set ourselves, but also to weather periods of crisis, because in navigation one sometimes encounters unexpected storms.

And this applies not only to the risk hedging structures we use from time to time to protect the portfolio, but also to asset exposures such as gold, given its role in preserving purchasing power over the long term. Finally, it relates to the nature of the companies we wish to invest in, prioritising factors such as the scarcity of the assets they hold and the quality of their business models, which enable them to weather periods of turbulence and greater difficulty in the economic cycle, reaching their ‘destination’ safely and soundly.

^[1] Source: Plenisfer Investments SGR. Data as of March 31, 2026.

^[2] Source: Bloomberg.

^[3] Source: Bloomberg.

^[4] Source: Bloomberg.

^[5] Source: Plenisfer analysis based on Bloomberg data.

^[6] Source: Plenisfer analysis based on Bloomberg data.

^[7] Source: Bloomberg.

Disclaimer

Marketing communication for professional investors in Italy. Please refer to the Prospectus and KID before making any final investment decisions. All market data is sourced from Bloomberg.

Destination Value Total Return ("DVTR") -Investment Objective and Policy: The objective of this Fund is to achieve a higher risk-adjusted total return over the market cycle. To achieve the Fund's objectives, it is essential to realize long-term capital appreciation and underlying income through a long-term orientation on valuation and market cycles. Benchmark: SOFR Index. The Fund is actively managed and uses the Benchmark to calculate the performance-related fee. The Fund does not use the Benchmark for investment purposes.

Destination Dynamic Income Total Return ("DDITR") - Investment Objective and Policy: The Fund aims to achieve attractive risk-adjusted total return through capital appreciation and income generation over the medium term. The Portfolio is actively managed and does not make investments in relation to any benchmark; this means that individual positions are actively selected based on specific research and evaluations. Although it is actively managed and does not use a benchmark for portfolio allocation, the Portfolio refers to the €STR Index for performance fee calculation purposes.

Destination Capital Total Return ("DCTR") - Investment Objective and Policy: The Portfolio aims to achieve an attractive total return in terms of risk through long-term capital appreciation with some income generation, focusing on long-term valuation and market cycles. The Fund is actively managed and does not make investments in relation to any benchmark; this means that individual positions are actively selected based on specific research and evaluations. Although it is actively managed and does not use a benchmark for portfolio allocation, the Portfolio refers to the MSCI ACWI Net Total Return USD Index for performance fee calculation purposes.

There is no guarantee that an investment objective will be met or that there will be a return on capital. The sub-fund do not benefit from any guarantees to protect capital.

Synthetic Risk Indicator DVTR (Class RX EUR – Acc): 3 (medium-low risk). 

Synthetic Risk Indicator DDITR (Class RX EUR – Acc): 2 (low risk). 

Synthetic Risk Indicator DCTR (Class IX USD – Ac): 4 (medium risk). 

The Risk Indicator may vary by Fund and share class, please refer to the relevant Prospectus and PRIIP KID for more details. For SRI classification of other share classes available in your country, please get in touch with your financial advisor.

Main risks of the Funds: interest rate risk, credit risk, emerging market risk (including China). There is no predetermined limit to exposure to emerging markets. Therefore, emerging market risk could be high at times, frontier market risk, foreign exchange risk, volatility risk, liquidity risk, derivatives risk, short exposure risk, distressed debt securities risk, securitized debt risk, contingent capital securities risk ("CoCos"), Equity risk, Commodity risk, Securities under Rule 144A / Regulation S. Capital loss risks: these funds are not guaranteed products. You may not receive part or all of the initial amount invested. Considering the investment strategies that characterize the Funds, the expected level of leverage may vary up to 350%, excluding the total net value of the portfolio. The use of leverage can increase the risk of potential losses. This is not an exhaustive list of risks, please refer to the relevant Prospectus and PRIIP KID for more details. Other risks may occur.

(DVTR) Costs: Class R, Share: X EUR Accumulation (ISIN: LU2185978587, registered in Italy). One-time costs on entry or exit: Entry costs: 5% of the amount you pay when you subscribe to this investment. This is the maximum you will be charged. Exit costs: 0% we do not charge an exit fee for this product. Underwriting costs are calculated based on NAV. Ongoing costs recorded each year: Management fees and other administrative costs: 1.6% per year (including management fee: 1.25%). This is an estimate based on last year's actual costs. Transaction costs: 0.3% per year of the value of your investment. This is an estimate of the costs incurred when we buy and sell the underlying investments for the product. The actual amount will vary depending on how much we buy and sell. Incidental charges incurred under certain conditions: Performance Fee: 0.00% The redemption fee is calculated based on the mechanism of the "High Water Mark with Performance-Related Fee Benchmark," with a Performance-Related Fee Rate of 15.00% per annum of the positive return achieved above the "SOFR Index" (the Performance-Related Fee Benchmark). The current amount will vary according to the performance of your investment.

(DDITR) Costs: Class R, Share: X EUR Accumulation (ISIN: LU2597958268, registered in, Italy). One-time costs on entry or exit: Underwriting costs: 4%, of the amount you pay when you subscribe to this investment. This is the maximum you will be charged Exit costs: 0%, we do not charge any exit fees for this product. Underwriting costs are calculated based on NAV. Ongoing costs recorded each year: Management fee and other administrative or operating costs: 1.3% (including management fee: max 1.10% per year) of investment value per year. This is an estimate based on the last year's actual costs. Transaction costs: 0.4% of the value of the investment per year. This is an estimate of the costs incurred in buying and selling the underlying investments for the product. Ancillary charges incurred under certain conditions: Performance fee: 0.00%. The performance fee is calculated according to the "High Water Mark with performance fee benchmark" mechanism with a performance fee rate of 15.00% per annum of the positive return above the €STR Index (the performance fee benchmark).

(DCTR) Costs: Class I, Share: X USD Accumulation (ISIN: LU2717270206, registered in Italy). One-time costs on entry or exit: Underwriting costs: 0%, we do not charge any underwriting fees for this product. This is the maximum you will be charged Exit costs: 0%, we do not charge any exit fees for this product. Underwriting costs are calculated based on NAV. Ongoing costs recorded each year: Management fee and other administrative or operating costs: 1.10% (including management fee: max 0.75% per year) of investment value per year. This is an estimate based on the last year's actual costs. Transaction costs: 0.1% of the value of the investment per year. This is an estimate of the costs incurred in buying and selling the underlying investments for the product. Ancillary charges incurred under certain conditions: Performance fee: 0.00%. The performance fee is calculated according to the "High Water Mark with performance fee benchmark" mechanism with a performance fee rate of 15.00% per annum of the positive return above the MSCI ACWI Net Total Return USD Index (the performance fee benchmark). The actual amount will vary according to the performance of your investment.

Performance and management fees are calculated and, where applicable, accrued separately for each share class within a sub-fund on each valuation day.

Reference currencies of the sub-funds: USD (Destination Value Total Return and Destination Capital Total Return) and EUR (Destination Dynamic Income Total Return). When the Fund/Action reference currency is different from yours, returns and costs may increase or decrease due to currency and exchange rate fluctuations.

Costs may increase or decrease depending on currency fluctuations and exchange rates. This is not an exhaustive list of costs. Other costs apply and vary depending on the share class. Before making any investment decision, please read the Prospectus and the Key Information Document (KID), especially the sections on risks and costs. The documents are available at the following web pages: 

• https://www.plenisfer.com/it/en/professional/fund-page/plenisfer-investments-sicav-destination-value-total-return-rx-eur-accumulation-or-lu2185978587-distr-LU2185978587 

• https://www.plenisfer.com/it/en/professional/fund-page/plenisfer-investments-sicav-destination-dynamic-income-total-return-rx-eur-accumulation-or-lu2597958268-acc-LU2597958268 

• https://www.plenisfer.com/it/en/professional/fund-page/plenisfer-investments-sicav-destination-capital-total-return-ix-usd-accumulation-or-lu2717270206-distr-LU2717270206

Recommended holding period: 5 years (DVTR), 4 years (DDITR), 5 years (DCTR)

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Important Information

This marketing communication relates to Plenisfer Investments SICAV, an investment company with variable capital (SICAV) under the Luxembourg law of December 17, 2010, qualified as an undertaking for collective investment in transferable securities (UCITS), and its Sub-Funds, "Destination Value Total Return (“DVTR”)”, "Destination Dynamic Income Total Return (“DDITR”)”, and "Destination Capital Total Return ("DCTR")," collectively referred to as "the Funds.”. This marketing communication is intended for professional investors in Italy, where the Funds is registered, and is not intended for retail investors or U.S. persons as defined in Regulation S of the United States Securities Act of 1933, as amended.

This document is co-issued by Generali Asset Management S.p.A. Asset Management Company, Generali Investments Luxembourg S.A. and Plenisfer Investments SGR S.p.A. ("Plenisfer Investments"). Plenisfer Investments is authorized as a SICAV - UCITS management company in Italy, regulated by the Bank of Italy - Via Niccolò Machiavelli 4, Trieste, 34132, Italy - CM: 15404 - LEI: 984500E9CB9BBCE3E272.

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