Carmignac Portfolio Family Governed: Letter from the Fund Manager
+1.24%Carmignac Portfolio Family Governed's performance
in the 4th quarter of 2022 for the A EUR Share class
+0.75%Reference indicator’s performance
in the 4th quarter of 2022 for MSCI ACWI (EUR)
-18.60%Performance of the Fund Year
to date versus -13.01% for the reference indicator
In the fourth quarter of 2021, Carmignac Portfolio Family Governed gained +1.24%, while its reference indicatori was up +0.75%. The Fund posted a performance of -18.60% over the year, compared to -13.01% for its reference indicator.
Quarterly performance review
Global equity markets enjoyed a modest positive return in the fourth quarter, catalysed by expectations that headline inflation in the US would ease, allowing the Federal reserve to slow the rate of future interest rate rises. Rate increases have been the largest headwind for markets and for our fund in particular this year. The hope of slowing inflation was confirmed with November data in the US, even if in Europe the rate remains high at c10%. In addition, the apparent relaxing of anti-covid restrictions in China also improved sentiment. While these factors are supportive, the extent of any slowdown in economic growth and corporate profit growth in 2023 remains a large unknown.
Stock selection was the key contributor to our positive return in the period set against a headwind from the sectoral composition of the market. The best sectors year to date, namely Energy, Financials and Commodities continued to lead despite some change in the macroeconomic backdrop. These are sectors where we find few examples of well managed family businesses with strong financial credentials. Happily, our stocks among less in-favour sectors more than offset this.
How is the fund positioned?
The consumer stocks in the fund performed particularly well. Hermes the luxury goods company saw its stock rise 19% in the period, driven by continued strong results for the prior quarter with strong double-digit demand in all regions including some recovery in China, where news of lifting covid restrictions in the fourth quarter helped buoy the name further. Sodexo was also a strong consumer name rising 18% as quarterly results continued to show the company emerging successfully from the covid related lockdowns with strong organic growth and recovering profit margins. It is particularly encouraging to see strong results for the firm after a period of management change including the appointment of Sophie Bellon as Chair and CEO, an increasingly unusual structure among French companies and one we have been engaging with the company over. Estee Lauder rose 5% on optimism over easing lockdowns in Greater China, despite disappointing Q3 results which showed material impact up to that point in that region and ongoing investment which are set to penalise margins in the following quarter. Finally in the sector, EssilorLuxottica rose 21% on not only continued high single digit organic sales growth with improving trading in China, but also reflected investors willingness to finally appreciate the long-term potential of the clear global market leader in the eyewear sector to sustain growth and improve margins.
On the negative side we saw ongoing concerns around Amazon the online retailer where slowing growth in their cloud hosting business combined with margin reduction for the group caused by cost increases confirmed our doubt about near term profitability. The stock fell 20% and we sold out of our remaining holding during the period. Roche the Swiss pharma company was also a weak name, falling 12%. The chief reason was the failure of their Alzheimer’s drug in late-stage clinical trials, even though expectations were low. We believe the reaction was overdone. Elsewhere in healthcare we saw strong performances from Novo Nordisk +23% and Eli Lilly +4% as their innovative diabetes products continue to outsell expectations.
What is our outlook for the coming months?
We have been more active in the fourth quarter adding several new holdings including security software name Fortinet, industrial supplies distributor W.W. Grainger, bottling and distribution firm Coca-Cola Consolidated, and Medpace a pharmaceutical contract research organisation, among others. To fund these purchases, we sold out of our remaining holding in Chinese contract drug manufacturer Wuxi Biologics, where we see a weakening of their long term cost advantage, and also Alphabet the owner of Google.
Notwithstanding a difficult sectoral rotation during 2022 we stick to our long-term process. We invest in fundamentally high-quality companies which also have a significant family or founder shareholder to guide the company and enable long-term strategic decisions. Detailed corporate governance analysis is essential to identify the most beneficial names among this group.
iReference indicator: MSCI AC World (NR, EUR)
Carmignac Portfolio Family Governed A EUR Acc
Recommended minimum investment horizon
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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.
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.
* 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 Family Governed A EUR Acc
?Year to date
|Carmignac Portfolio Family Governed A EUR Acc||-||+11.15 %||+16.01 %||+27.00 %||-18.60 %||+3.44 %|
|Reference Indicator||-||+15.21 %||+6.65 %||+27.54 %||-13.01 %||+4.76 %|
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|3 years||5 years||10 years|
|Carmignac Portfolio Family Governed A EUR Acc||+9.38 %||-||-|
|Reference Indicator||+10.08 %||-||-|
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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 28/02/2023
|Entry costs :||4,00% of the amount you pay in when entering this investment. This is the most you will be charged. 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, but the person selling you the product may do so.|
|Management fees and other administrative or operating costs :||1,83% 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 :||0,21% 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.|