Carmignac

Carmignac P. Credit : Letter from the Fund Managers

  • +2.81%
    Carmignac P. Credit’s performance

    in the 4th quarter of 2022 for the A EUR Share class

  • +2.16%
    Reference indicator’s performance

    in the 4th quarter of 2022 for the 75% ICE BofA Euro Corporate Index et 25% ICE BofA Euro High Yield Index

  • +0.65%
    Outperformance of the Fund

    on the quarter versus the reference indicator

Carmignac Portfolio Credit A share in EUR was down 13.01% in 2022, vs. a 13.31% decline in its reference indicator¹. In the fourth quarter, the EUR A share gained 2.81%, 65bp more than its reference indicator1.

Quick overview on 2022

2022 was a terrible year for credit markets globally. No corners of the credit world were spared, with double-digit declines the norm across sub-asset classes. We were disappointed by our deeply negative absolute return and are determined to recover the lost ground for our clients going forward – more on that below. We make plenty of mistakes every year; we are fully aware that we made too many in 2022, resulting in significantly lower outperformance than in previous years. That said, given the unprecedented circumstances and the long bias (with no currency exposure) embedded in our fund’s mandate, we think our investment process has fared decently, and it has been strengthened by the lessons learned from our mistakes.

Performance review

Barring Russia, we saw more improved situations than default incidents among the companies in our portfolio. The financial health of a significant number of issuers whose bonds we own picked up as a result of inflation (especially in the commodities and finance sectors). Our hedges played their role and contributed positively to our full-year return (one could argue that we should’ve hedged more but we were at the upper limit of our hedging capacity for a good part of the year). As discussed in previous quarterly reports, we misjudged how the war in Ukraine would play out, and have learned our lesson in terms of better controlling for country risk in the future. Most Russian issuers are still meeting their debt service obligations and the value of our investments there recovered in the second half. For bonds that were trading close to a conservative assessment of their fundamental value and for which there was enough market liquidity to sell, we took advantage of the opportunity to dispose of our holdings. We will continue to do so going forward.

What is our outlook for the coming months?

We are excited about the performance prospects for our portfolio as we head into 2023. It currently has an adjusted yield of more than 9% along with an average BB+ rating (but beyond ratings, we believe our portfolio is made up of companies with robust fundamentals whose risks are very well remunerated). This level of carry is historically high and tilts the range of potential outcomes very much in favour of investors in our fund. Even if credit markets experience another once-in-50-year bear market for the second year in a row, our portfolio’s yield means we could withstand at least 200bp of further widening before our returns slide into negative territory. Such additional widening, whether it occurs in rates or spreads, would likely be devastating for many other asset classes (including private-market investments, which mostly didn’t reprice in line with the fundamentals in 2022 and which could be due for a catchup if the environment deteriorates further). In such a scenario, we believe our hedges and our bond-picking would allow us to outperform, as we have in every calendar year since the fund was launched. Conversely, if spreads tighten across the credit space, it’d be hard not to imagine us delivering solid double-digit returns owing to both the resulting capital appreciation and the fixed income. Attractive opportunities are to be found by staying rational when markets are driven by fear, and rarely in our careers have we seen such a good window of opportunity.

In addition to today’s favourable market climate, we’re excited about what looks like the end of more than 10 years of financial repression. Now that the major central banks are injecting less liquidity, rates and spreads should settle in at structurally higher levels. A more substantial cost of capital will cause average default rates to return to normal – and bring back meaningful alpha generation opportunities in restructuring situations along with generous risk premia. In all, we believe Carmignac Portfolio Credit has the wind in its sails and offers much greater potential for delivering solid returns and outperforming in the years to come than ever before.

Sources: Carmignac, Bloomberg, 31/12/2022

Carmignac Portfolio Credit

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Carmignac Portfolio Credit A EUR Acc

ISIN: LU1623762843

Recommended minimum investment horizon

Lower risk Higher risk

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1 2 3 4 5 6 7
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.

RISK OF CAPITAL LOSS: The portfolio does not guarantee or protect the capital invested. Capital loss occurs when a unit is sold at a lower price than that paid at the time of purchase.

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.

* Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time.

Carmignac Portfolio Credit A EUR Acc

ISIN: LU1623762843
2018 2019 2020 2021 2022 2023 (YTD)
?
Year to date
Carmignac Portfolio Credit A EUR Acc +1.69 % +20.93 % +10.39 % +2.96 % -13.01 % -
Reference Indicator -1.74 % +7.50 % +2.80 % +0.06 % -13.31 % -

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3 years 5 years 10 years
Carmignac Portfolio Credit A EUR Acc -0.38 % +3.98 % -
Reference Indicator -3.75 % -1.19 % -

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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).

Source : Carmignac at 30/12/2022

Maximum subscription fees paid to distributors : 4,00%
Redemption fees : 0,00%
Ongoing Charges : 1.20%
Conversion Fee : 1%
Management fees : 1,00%
Performance fees : 20,00%

Marketing communication. Please refer to the KID, 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. Company. 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​ 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

  • UK: This document was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013).​ ​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 Financial Conduct Authority (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: Second Floor, 52-54 Gracechurch Street, London EC3V 0EH, UK; Registered in England and Wales with number 4162989. Carmignac Gestion Luxembourg SA, UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013) has been appointed as the Investment Manager and distributor in respect of the Company.

  • 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