Of annualized performance since launch of the fund (31/07/2017), compared to
-0.27% for its reference indicator1.
Carmignac Portfolio Credit was up +1.74% during Q3 2023, versus +0.64% for its reference indicator1. Since the beginning of the year, the fund is up +4.69% vs. +3.27% for its reference indicator, outperforming by 1.42%.
After the volatile episodes surrounding the demise of Silicon Valley Bank and Credit Suisse, we saw a return to calm in May and June which persisted during the third quarter of 2023. Primary markets were well functioning and very active in most corners of our investment universe, offering attractive new investment opportunities, especially in high yield in developed and emerging markets.
Now that fixed income investors enjoy low risk investment options that offer meaningful positive return (such as short-term treasuries), they feel much less need to stretch across the risk spectrum to reach for yield than they used to. This has re-established the balance between supply and demand for credit risk in favour of investors. For example, as the primary market reopened widely in the past months, we have seen plain vanilla BB issuers in the primary market financing themselves at spreads 20 to 30% higher than in 2019 or 2021, all things being equal. We believe investors are now well compensated in the high yield space, even taking into account an expected pickup in defaults. Complex situations attract even higher remunerations compared to the past, which is illustrated by the generous spreads on offer in the “collateralized loan obligation” space (CLO tranches have been the largest contributor to performance of the fund so far this year).
As a result, the fund offers now a yield superior to 9% while maintaining a solid credit quality (with an average BB+ rating) and a high level of diversification. This is despite maintaining c. 10% of hedges through CDS on HY indices. This high level of carry offers meaningful protection against the impact of potential credit incidents or the widening of spreads. In addition, our exposure to (floating) CLO tranches and inflation friendly sectors such as natural resources and financials should mitigate the impact of interest rate volatility on performance going forward.
As we discussed in our last letter, this return of value for the credit markets as well as the presence of wide complexity premia available to bond pickers is very exciting for the future performance of Carmignac Portfolio Credit. Additionally, we expect this higher cost of financing across the board will restore an environment for credit defaults, similar to what we had for the first three decades of the high yield market, and hence attractive opportunities for high alpha distressed debt investments.
*Risk Scale from the KID (Key Information Document) / KIID (Key Investor Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. **Sustainable Finance Disclosure Regulation (SFDR) 2019/2088. EU Act that requires asset managers to classify funds into categories, “Article 8” funds promote environmental and social characteristics, “Article 9” funds have sustainable investments as a measurable objective. In addition to not promoting environmental or social characteristics, "Article 6" funds have no sustainable objectives.
|Carmignac Portfolio Credit||1.79||1.69||20.93||10.39||2.96||-13.01|
|Carmignac Portfolio Credit||-0.93 %||+5.04 %||-|
|Reference Indicator||-2.64 %||+0.34 %||-|
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
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.
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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.
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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.
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