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Carmignac Patrimoine: 2022 end of summer update

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YTD Performance Review

Escalating concerns that central banks' efforts to tackle inflation by hiking rates will trigger a global recession has been the main topic for markets over the last months and this should remain relevant for several months.

Therefore, the global portfolio construction has remained highly cautious since the beginning of the year

  • Average equity exposure: 16%
  • Average modified duration: 1.6
  • Average cash exposure 24%.

Over the summer, this under-exposure to risky assets did not allow us to benefit from the rebound in equity/credit market. This market rebound led by a reversal in market participants’ sentiment is more likely to be a bear market rally rather than a change of environment.

Indeed, in late August, in response, central bankers reminded the markets that they would not be changing the course of monetary tightening any time soon.

More broadly, since the beginning of the year, Carmignac Patrimoine A EUR Acc lost -11.48% underperforming the -5.18% drop in its reference indicator¹. The negative absolute and relative performance has been fuelled by:

  • Main detractors
    • Russian bonds which contributed for -2.8% (vs -4.4% as of end of April).

    Indeed, the dislocation of the Russian market in the wake of sanctions and numerous forced sellers did not allow us to liquidate all of our positions in conditions that would have been in the best interest of our clients. We gradually exit securities still present in the portfolio when market conditions allow to preserve the interest of our clients, our primary objective.

    • Credit investments (credit selection, CLOs) penalized by one of the worst credit market crisis

    • Sector rotation hurting some equity long term convictions within tech and consumer sectors – mainly over the first half of the year

  • Main contributors

    • Hedging policy (interest rate derivatives to quickly adapt modified duration, short growth equity indexes such as Nasdaq/ basket of high valuation stocks)

    • Healthcare allocation and stock selection (Eli Lilly, Novo Nordisk, Elevance Health)

Notable portfolio moves

Over the last months, the objective has been to continue derisking the portfolio. Either by increasing the hedges or by buying resilient companies able to survive in a stagflation environment.

  • NEW POSITIONS/ REINFORCEMENT

    • Defensive companies to solidify the portfolio construction – Nestlé, Catalent

    • Cloud/Software for their attractive and recurring revenue streams profile & lower valuations – Oracle

    • Credit protection

    • USD exposure as growth momentum is in favor of the US & term of trades are in favour of the euro

  • POSITIONS SOLD/ REDUCED

    • Cyclical names as recession risk is rising (Volkswagen)
    • Banks as rising rates will turn from a tailwind to banks to a headwind as retail and wholesale losses begin to pick-up (Lloyd, BNP Paribas)
    • EM debt due to recession risk and tightening monetary policy (Brazil)
    • Businesses sensitive to advertising (Google/Meta)

Outlook

Implementation of our macro-economic scenario within our portfolio

In line with our house view, the portfolio is built to face a global stagflation scenario. While putting a strong emphasis on risk management, this environment should offer several investment opportunities for active management that could support the absolute performance.

Here are the main investment themes at play in the portfolio currently:

  • US exceptionalism

    Within this stagflation environment, given its relative immunity from the global energy crisis and a solid job market, the US consumer should support US growth.

    • Selection of consumer names that should benefit from a resilient US consumption outlook with names like Costco, O’Reilly Automotive, Amazon, Home Depot, Constellation Brands

    • Neutral/long position on US rates as a front loading by the Federal Reserve increases yields on shorter maturity, it should also eventually weigh those of longer maturities, reflecting lower growth

    • Long Dollar position

  • Rising concerns on the European economy (economic and political)

    While the economy is already showing some signs of weakness, inflationary pressures keep building up letting no choice to the ECB to further tighten its monetary policy. In addition, the continent is under threat of energy restrictions.

    • Short position on the Euro Stoxx 50

    • Hedges on European credit index

    • Neutral/short bias on European sovereign rates (Underweight positioning on European periphery)

    • Carry of the European credit portfolio (subordinated financial debt, structured credit, specific names’ reconstituted carry allows for digesting volatility)

  • Imbalanced supply/demand equilibrium in the energy sector

    • Long credit position in the energy sector

    • Exposure to transitioning traditional energy companies (Total, Schlumberger)

    • Investment in renewable energy stocks (Orsted)

    • Selection of commodities exporters (Mexico)

  • Highly volatile markets within a downward trend for risky assets

    • Active management of equity and modified duration to gain exposure quickly in case of bear market rally

    • Gold to manage geopolitical and economic risks

    • Cash that we stand ready to deploy as markets continue to dislocate

What to expect in terms of performance over the next months?

Despite putting a strong emphasis on risk management, we have several performance drivers for the following months:

  • Most of the underperformance YTD has been driven by a temporary under-performance of some of our long-term convictions. Therefore, discrepancies between fundamentals and valuations offer room for a catch-up in some of convictions i.e. energy and financial credit, stocks in consumer and tech sectors.

  • Net long equity exposure (20%) driven by health care, energy, consumption exposure

  • High carry of the credit portfolio (YTM 4%)

  • Long dollar position (directional and carry) (61%)

  • Our cash will be deployed to rebuild some long-term return potential in both equity and fixed income markets as soon as market conditions improve (23%)

Positioning


Carmignac

Portfolio composition may change over time.
Source: Carmignac, 31/08/2022

Carmignac Patrimoine

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Carmignac Patrimoine A EUR Acc

ISIN: FR0010135103
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (YTD)
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Year to date
Carmignac Patrimoine A EUR Acc +8.81 % +0.72 % +3.88 % +0.09 % -11.29 % +10.55 % +12.40 % -0.88 % -9.38 % +2.20 % +5.79 %
Reference Indicator +15.97 % +8.35 % +8.05 % +1.47 % -0.07 % +18.18 % +5.18 % +13.34 % -10.26 % +7.73 % +7.93 %

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3 Years 5 Years 10 Years
Carmignac Patrimoine A EUR Acc -1.40 % +2.36 % +1.41 %
Reference Indicator +3.02 % +4.73 % +6.12 %

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Source: Carmignac at 30/09/2024

Entry costs : 4,00% of the amount you pay in when entering this investment. This is the most you will be charged. Carmignac Gestion doesn't charge any entry fee. The person selling you the product will inform you of the actual charge.
Exit costs : We do not charge an exit fee for this product.
Management fees and other administrative or operating costs : 1,51% of the value of your investment per year. This estimate is based on actual costs over the past year.
Performance fees : 20,00% max. of the outperformance once performance since the start of the year exceeds that of the reference indicator and if no past underperformance still needs to be offset. The actual amount will vary depending on how well your investment performs. The aggregated cost estimation above includes the average over the last 5 years, or since the product creation if it is less than 5 years.
Transaction Cost : 0,63% of the value of your investment per year. This is an estimate of the costs incurred when we buy and sell the investments underlying the product. The actual amount varies depending on the quantity we buy and sell.

Carmignac Patrimoine A EUR Acc

ISIN: FR0010135103

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Main risks of the Fund

EQUITY: The Fund may be affected by stock price variations, the scale of which is dependent on external factors, stock trading volumes or market capitalization.

INTEREST RATE: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.

CREDIT: Credit risk is the risk that the issuer may default.

CURRENCY: Currency risk is linked to exposure to a currency other than the Fund’s valuation currency, either through direct investment or the use of forward financial instruments.

The Fund presents a risk of loss of capital.

Marketing communication. Please refer to the KID/KIID, prospectus of the fund before making any final investment decisions. This document is intended for professional clients.

This material may not be reproduced, in whole or in part, without prior authorisation from the Management Company. This material does not constitute a subscription offer, nor does it constitute investment advice. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. This material has been provided to you for informational purposes only and may not be relied upon by you in evaluating the merits of investing in any securities or interests referred to herein or for any other purposes. The information contained in this material may be partial information and may be modified without prior notice. They are expressed as of the date of writing and are derived from proprietary and non-proprietary sources deemed by Carmignac to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Carmignac, its officers, employees or agents.

Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged.

Reference to certain securities and financial instruments is for illustrative purposes to highlight stocks that are or have been included in the portfolios of funds in the Carmignac range. This is not intended to promote direct investment in those instruments, nor does it constitute investment advice. The Management Company is not subject to prohibition on trading in these instruments prior to issuing any communication. The portfolios of Carmignac funds may change without previous notice. The reference to a ranking or prize, is no guarantee of the future results of the UCIS or the manager.

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The Funds’ prospectus, KIDs, NAVs and annual reports are available at www.carmignac.com, or upon request to the Management Carmignac Portfolio refers to the sub-funds of Carmignac Portfolio SICAV, an investment company under Luxembourg law, conforming to the UCITS Directive. The French investment funds (fonds communs de placement or FCP) are common funds in contractual form conforming to the UCITS or AIFM Directive under French law.

  • In France, Luxembourg, Sweden: The risks, fees and ongoing charges are described in the KID (Key Information Document). The KID must be made available to the subscriber prior to subscription. The subscriber must read the KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Funds present a risk of loss of capital. The Funds’ prospectus, KIDs, NAV and annual reports are available at www.carmignac.com, or upon request to the Management.

  • In the United Kingdom: the Funds’ respective prospectuses, KIIDs and annual reports are available at www.carmignac.co.uk, or upon request to the Management Company, or for the French Funds, at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R. This document was prepared by Carmignac Gestion, Carmignac Gestion Luxembourg or Carmignac UK Ltd. FP Carmignac ICVC (the “Company”) is an Investment Company with variable capital incorporated in England and Wales under registered number 839620 and is authorised by the FCA with effect from 4 April 2019 and launched on 15 May 2019. FundRock Partners Limited is the Authorised Corporate Director (the “ACD”) of the Company and is authorised and regulated by the FCA. Registered Office: Hamilton Centre, Rodney Way, Chelmsford, Essex, CM1 3BY, UK; Registered in England and Wales with number 4162989. Carmignac Gestion Luxembourg SA has been appointed as the Investment Manager and distributor in respect of the Company. Carmignac UK Ltd (Registered in England and Wales with number 14162894) has been appointed as a sub-Investment Manager of the Company and is authorised and regulated by the Financial Conduct Authority with FRN:984288.

  • In Switzerland: the prospectus, KIDs and annual report are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland), S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Montrouge, Nyon Branch / Switzerland, Route de Signy 35, 1260 Nyon.

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