Carmignac Patrimoine: Letter from the Fund Managers - Q4 2025

Carmignac Patrimoine (A EUR Acc) delivered a performance of +1.48% in the fourth quarter of 2025, outperforming its reference indicator, which had a performance of +1.14%. Over the full year 2025, the Fund achieved a performance of 12.12%, compared with +1.09% for the reference indicator.

In 2025, financial markets evolved in a broadly constructive but uneven environment shaped by gradually stabilizing inflation, resilient, though moderating, global growth, and a decisive turn toward more accommodative monetary policies. The year was initially marked by heightened political and macroeconomic uncertainty following Donald Trump’s inauguration as the 47th U.S. President, as new trade tariffs and immigration measures unsettled investor expectations. Additional concerns around intensified competition from China in artificial intelligence, the timing of interest rate cuts, and slowing U.S. momentum triggered several sharp yet short-lived market corrections in the first months of the year. From the April lows, however, risk assets staged a strong recovery, supported by continued economic resilience, renewed fiscal stimulus across major regions, and interest rate cuts by key central banks, which lifted valuations and restored risk appetite.

Equity markets ended the year firmly higher, with notable regional divergences. U.S. equities remained resilient, underpinned by sustained enthusiasm for artificial intelligence, strong capital expenditure by hyperscalers, solid earnings growth, and rising strategic activity across the cloud and infrastructure ecosystem. European and Emerging Market equities outperformed, benefiting respectively from easing inflation and improving growth prospects, boosted by a sizeable German fiscal stimulus in the Old continent, and from a weaker U.S. dollar and renewed investor interest in EM, particularly in semiconductor-exposed markets such as Taiwan and South Korea. In fixed income, bond markets reflected diverging policy paths: U.S. long rates declined as growth slowed and the Federal Reserve delivered three rate cuts in the second half of the year, while eurozone yields rose on the back of revived fiscal ambitions and improving growth expectations. Japan stood apart, with persistent inflation and aggressive fiscal support prompting the Bank of Japan to tighten policy, driving a sharp rise in long-term yields. Meanwhile, credit markets continued to attract strong inflows for a third consecutive year, with spreads tightening further as investors sought attractive yield amid supportive technicals, dovish central banks, and sustained fiscal backing. Geopolitical uncertainty fueled a strong rally in precious metals.

The Fund ended the year with another strong quarter, marking its fourth consecutive positive quarterly performance and its fourth outperformance versus the index. Over the year as a whole, the Fund delivered robust double-digit performance, exceeding global equity markets despite maintaining an average equity exposure of approximately 40%. This outcome reflects a deliberate portfolio construction approach, combining selective risk-taking with disciplined diversification across asset classes.

Risk-adjusted performance remained a defining feature. Active risk management translated into a smoother return profile, characterised by fewer negative months, materially lower volatility, and a significantly reduced drawdown compared with the reference indicator. This asymmetric profile highlights the effectiveness of both allocation decisions and hedging strategies in navigating a complex and often volatile market environment.

Equities were the primary contributor to returns. Performance was driven by strong stock selection, particularly among US and Asian technology leaders benefiting from structural growth trends linked to artificial intelligence and semiconductor demand, including Alphabet, Nvidia, TSMC and SK Hynix. These positions were complemented by selective exposure to financials, such as UBS and Itaú Unibanco, which provided diversification and contributed positively amid divergent regional monetary and regulatory dynamics.

Active equity management also played a critical role in downside protection. Tactical adjustments and hedging mitigated the impact of sharp market corrections, most notably during the “Liberation Day” episode, while preserving upside participation. In parallel, exposure to precious metals, particularly through gold and silver mining equities, allowed the Fund to capture the rally in metals and reinforced portfolio convexity.

In fixed income, performance stemmed primarily from short-duration strategies and tactical positioning along the US yield curve, reflecting our cautious stance on long-term rates. Inflation-linked bonds further contributed as realised inflation dynamics continued to exceed conservative market pricing. The credit portfolio benefited mainly from carry generation. While CDS positions modestly detracted from performance, this reflected prudent portfolio construction and hedging decisions rather than adverse credit fundamentals.

Finally, currency management was a meaningful source of relative performance. The Fund’s structural underexposure to the US dollar proved beneficial in a context of significant USD depreciation over the year, reinforcing the value added by active FX allocation.

Looking ahead, we expect global growth to remain supported by ongoing fiscal stimulus across major economies, including the United States, Europe and Japan. However, this support is likely to come at the expense of higher medium-term inflation risks, particularly in the US, where fiscal sustainability and policy credibility remain key concerns.

Against this backdrop, the portfolio remains positioned to balance participation in risk assets with targeted defensive protection. We maintain meaningful equity exposure, a negative modified duration, and selective hedges, notably through exposure to the Japanese yen, CDS protection, put options on US equity indices and gold mining equities.

We remain constructive on equities, supported by resilient economic growth, accommodative financial conditions and the continuation of the AI-driven capital expenditure cycle. However, elevated valuations constrain the margin of safety and reinforce the need for selectivity. Within technology, we have refined our AI exposure, prioritising higher-quality segments with more visible earnings trajectories while reducing exposure to the most speculative, high-beta names. Beyond technology, we are increasingly allocating to companies mischaracterised as AI losers, particularly in software and financial infrastructure, where valuation dislocations offer attractive risk-reward profiles.

On rates, we remain cautious on duration, especially in the United States. Persistent inflationary pressures, elevated government issuance and questions around central bank credibility limit the potential for a sustained decline in yields. In this environment, inflation-linked bonds continue to offer attractive optionality, with market-implied inflation remaining low relative to structural inflation drivers.

Moreover, heightened policy unpredictability, combined with the tolerance of the Trump administration for a weaker US dollar, leads us to maintain a cautious medium-term view on the currency. Persistent unfunded fiscal expansion, widening twin deficits and elevated policy uncertainty are likely to exert sustained downward pressure on the dollar over time. In this context, selective non-USD exposures continue to offer both diversification benefits and attractive potential for relative performance.