Carmignac P. Global Bond: Letter from the Fund Manager

Published on
11 January 2024
Read time
7 minute(s) read
+3.02%Carmignac P. Global Bond performance in 2023 for the A EUR Share class.
+0.50%Reference indicator’s performance in 2023 for the JP Morgan GBI Global (EUR).
+2.52%Outperformance of the fund during the year versus its reference indicator.

Carmignac Portfolio Global Bond has realised a yearly performance of +3.02% (class A shares), and it outperformed its reference indicator1(JP Morgan Global Government Bond Index (EUR)), which delivered +0.50%.

The bond markets today

The bond markets remained relatively volatile in 2023, with inflation being the main concern in the first half of the year. During the second half though, and especially during the last quarter, deflationary trends pushed the main central banks to bring their hiking cycles to an end. In our view this trend has been stronger than anticipated and we may be nearing its end. As a result, central banks - were the second most important theme during the year. In their latest communications (during Q4) they announced a definitive pause in their rate hike cycles and evoked the prospect of a rate cut for the coming year in the case of the US Federal Reserve (the Fed). On the back of this intervention, long yields fell considerably, with the German 10-yr yield easing by -85bp to 2% and the US 10-yr yield falling by -70bp to 3.88%, benefiting from expectations of monetary easing in 2024. However, we believe that the market has already priced in a significant amount, if not too much, with a large number of rate cuts expected for next year.

Meanwhile, the Chinese economy continued to disappoint markets, mainly due to the prolonged crisis in the real estate sector. Despite making marginal interest rate cuts, the People's Bank of China is still refraining from implementing a significant stimulus package to jumpstart the economy. This will undoubtfully go through the devaluation of its currency.

However, we also believe that due to the US economic resilience, and most importantly deflationary trends towards the year-end the market got carried away almost assuming a near-perfect economic landing across asset classes. This has led in our view to an asymmetric risk profile in most asset classes.

Developed countries currency movements did not have much of an impact in 2023, as implied volatility ended the year close to its lowest point in the previous two years. Having said that, the currency markets did offer some juicy rather tactical opportunities. For instance, real yield fluctuations over the past few months (especially in December) have benefited the JPY, NOK and SEK over the USD or the EUR.

With regards to emerging markets, last year proved to be very resilient despite very aggressive tightening which many thought would have destroyed the asset class. For instance, hard currency debt was up around 10% mainly from spread compression in the higher yielding portions of the market. The local currency debt market was up approximately 8% mainly driven by high real rate yielding countries such as Brazil, Colombia or Hungary to name a few. The year was also positive for a selection of emerging currency names such as Mexican and Colombian pesos. In fact, emerging markets were better prepared during this hiking cycle as they started hiking well before the Fed, the external buffers notably in foreign currencies reserves were larger than in previous crises.

Fund performance

Carmignac Portfolio Global Bond generated a positive performance in 2023, particularly in the fourth quarter, and well above its reference index. Among the factors contributing to this positive performance, our selection of corporate credit securities played a significant role, despite our hedging strategies in that area. Our structured credit investments also had a notably positive impact on the fund's performance throughout the year and in the last quarter. Furthermore, our currency and emerging debt strategies added value to the fund's performance, despite the negative overall contributions from the US dollar and Japanese Yen over the year. However, we capitalized on the reversal of the Yen's trend in the fourth quarter, as it outperformed the Euro and USD. Additionally, our long duration strategy faced challenges in the first half of the year but performed well in the last quarter due to the easing preassures from central banks. Overall, we are pleased with the performance of our investment strategies and the contributions made by various asset classes.

Outlook

As aforementioned we now exercise caution and have decreased the duration of the fund to around 3 as at the year end. To sum up there are in fact three main stories influencing our approach. Firstly, central banks have shifted their stance with regards to monetary policy. However, we believe that the market has already priced in a significant number of cuts, with a total envelope of cuts priced for next year already reaching approximately 150 basis points in the US and Europe. As a result, we have tactically reduced the duration. Secondly, the deflation trend has been stronger than expected, but we believe that we may be nearing its end. The rhetoric around no landing in 2024, at least during the first half of the year, is bullish for inflation. We continue to favour real rates in the fund. Lastly, we anticipate a massive flood of supply, which we have already started to see since the beginning of the year. This influx may push the yield curves to steepen, leading us to be net short on long maturities. Given the cautiousness described earlier, we maintain some protection on credit. In terms of foreign exchange (FX), we have slightly increased our exposure to the US dollar, which now represents around 20% of the fund. We continue to hold around 8% of Japanese Yen. Additionally, we have a positive outlook on certain emerging markets and commodity currencies, including Brazilian Real and Chilean Peso but also Taiwanese Dollar and Korean Won and on the developed currencies front, we are long Norwegian Krone.

Sources: Carmignac, Bloomberg, 31/12/2023.

Carmignac Portfolio Global Bond

A global, flexible and macroeconomic approach to fixed income marketsDiscover the fund page

Carmignac Portfolio Global Bond A EUR Acc

ISIN: LU0336083497
Recommended minimum investment horizon
3 years
Risk indicator*
2/7
SFDR - Fund Classification**
Article 8

*Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. **The Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 is a European regulation that requires asset managers to classify their funds as either 'Article 8' funds, which promote environmental and social characteristics, 'Article 9' funds, which make sustainable investments with measurable objectives, or 'Article 6' funds, which do not necessarily have a sustainability objective. For more information please refer to https://eur-lex.europa.eu/eli/reg/2019/2088/oj.

Main risks of the fund

Credit: Credit risk is the risk that the issuer may default.Interest Rate: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.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.Discretionary Management: Anticipations of financial market changes made by the Management Company have a direct effect on the Fund's performance, which depends on the stocks selected.
The Fund presents a risk of loss of capital.

Fees

ISIN: LU0336083497
Entry costs
2,00% 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
1,20% of the value of your investment per year. This estimate is based on actual costs over the past year.
Performance fees
20,00% when the share class overperforms the Reference indicator during the performance period. It will be payable also in case the share class has overperformed the reference indicator but had a negative performance. Underperformance is clawed back for 5 years. 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
1,36% 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.

Performance

ISIN: LU0336083497
Carmignac Portfolio Global Bond13.83.39.50.1-3.78.44.70.1-5.63.0
Reference Indicator14.68.54.6-6.24.38.00.60.6-11.80.5
Carmignac Portfolio Global Bond- 0.2 %+ 0.7 %+ 2.3 %
Reference Indicator- 3.4 %- 1.8 %+ 1.4 %

Source: Carmignac at 29 Nov 2024.
​Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).

Related articles

Fixed Income Strategy18 October 2024English

Annual Dividends Distribution 2024 - Carmignac Credit 2025

Find out more
Fixed Income Strategy13 September 2024English

Merger of “Flexible Allocation 2024” into “Flexible Bond” in Carmignac Portfolio

1 minute(s) read
Find out more
Fixed Income Strategy30 April 2024English

Our Flagship Credit strategy best Fund in Europe by Lipper

1 minute(s) read
Find out more

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.

Morningstar Rating™ : © Morningstar, Inc. All Rights Reserved. The information contained herein: is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Access to the Funds may be subject to restrictions regarding certain persons or countries. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the material or availability of this material is prohibited. Persons in respect of whom such prohibitions apply must not access this material. Taxation depends on the situation of the individual. The Funds are not registered for retail distribution in Asia, in Japan, in North America, nor are they registered in South America. Carmignac Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Funds have not been registered under the US Securities Act of 1933. The Funds may not be offered or sold, directly or indirectly, for the benefit or on behalf of a «U.S. person», according to the definition of the US Regulation S and FATCA.
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, 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.

The Management Company can cease promotion in your country anytime.
Investors have access to a summary of their rights in English on the following links: UK ; Switzerland ; France ; Luxembourg ; Sweden.