Tareno Global Water Solutions Fund in April: How we are navigating trade conflicts

April Whiplash

Equity markets experienced a turbulent April as fears of a full-blown trade war dominated the headlines. The month began with a sharp global sell-off triggered by the United States’ sweeping tariff announcements, which wiped out trillions in market value within days. However, sentiment improved mid-month when the U.S. softened its stance by pausing some tariffs and easing tensions with China. Despite the dramatic swings, major indices such as the S&P 500, NASDAQ, and MSCI World finished the month nearly unchanged.

European equities also struggled, ending the month slightly negative amid falling consumer confidence and ongoing political uncertainty. In contrast, Japan posted a modest gain, supported by a recovery in services.

Although volatility was high, markets proved resilient, demonstrating that investor sentiment can turn quickly, even in an uncertain environment.

The Tareno Global Water Solutions Fund posted a -0.96% performance in April (W Euro Tranche).

Water companies between resilience and restraint

In early April, I attended an investor conference in Austria. The sharp impact of the so-called “Liberation Day” tariffs was clearly felt, even in the tranquil Vorarlberg Alps. Encouragingly, many CEOs remained composed despite the market turmoil, giving me the sense that they were well prepared for a wide range of potential scenarios.

Topics such as nearshoring and government infrastructure programs continue to support investment in water technologies, even though short-term sentiment is clouded by broader uncertainty. Many companies are currently cautious about new investments. For now, this isn’t causing acute issues thanks to robust order books, but the situation warrants close monitoring. Conversations with companies such as Andritz and Wienerberger revealed encouraging signs. Germany’s infrastructure package could further boost sentiment, and economic conditions in Eastern Europe are often described as surprisingly resilient.

Our month in the water: These companies impressed us in April

Earnings season is in full swing. Therefore, we would like to share some convincing reports:

Andritz exceeded expectations with strong hydro and pulp order intake, which was a positive surprise. They confirmed their guidance and mentioned that they have not yet seen any tariff impact. We view Andritz as one of the most compelling stories in our portfolio.

A.O. Smith is navigating tariffs by raising prices. Undoubtedly, the pull-forward of demand helped Q1, but the valuation remains attractive. China remains a drag for the time being, but things could change quickly if the government acts to stimulate the economy.

Veralto beat Q1 expectations, but the unchanged guidance was left as is. This may indicate conservatism, which is not necessarily a bad thing in the current environment. Management was vague about tariffs, but it is assumed that pricing will offset them. M&A and reshoring trends are potential catalysts.

Pentair’s margins are expanding despite a soft top line. Pricing and changes in the supply chain offset the impact of tariffs. Solid execution and internal improvements are key positives in a volatile macro environment.

Sector analysis: Who stands to gain and who stands to lose from the new trade policy?

Some industries are better positioned to withstand this turbulence. Microelectronics, pharmaceuticals, and data centers benefit from strong structural demand and political alignment, making them attractive despite current headwinds. Precious metals mining may also perform well, driven by investor uncertainty and potential shifts in confidence away from U.S. Treasuries. Energy metals, such as copper, could gain ground as AI and electrification trends continue to advance; however, long lead times and capital intensity could cause delays. The food and beverage industry stands out as a relatively stable performer, as it is less tied to global trade cycles.

In contrast, traditional heavy industries, such as steel, bulk chemicals, and textiles, may be under the most pressure. Their exposure to global trade, high capital intensity, and limited pricing power under new tariff regimes make them vulnerable. The unconventional oil and gas sector may fare better than in past downturns due to lower investment thresholds; however, it still faces challenges.

For companies providing water technologies to the public sector, the outlook is positive. Although project costs in the U.S. may rise further, utility investments are largely non-discretionary and long overdue.

Water sector remains promising – selective investment pays off

Our investment process enables us to actively adjust our exposure toward companies serving stronger end markets, helping us navigate uncertainty while focusing on opportunities.

While volatility in capital markets and geopolitics warrants caution, we remain confident in the long-term fundamentals of the water sector. Success will be defined by selectivity and resilience.