Carmignac P. Credit: Letter from the Fund Managers - Q3 2025
Carmignac Portfolio Credit was up 2.4% vs. 1.1% for the reference indicator during the third quarter, for an outperformance of 1.3% (F EUR Acc shareclass). The fund is up 6.3% for the year at the end of September vs. 3.2% for the reference indicator, for an outperformance of 3.1% (EUR Class A share).
Review of Q3 2025 performance
Almost all the fund’s performance drivers participated to this solid return, with an especially strong contribution from a distressed investment in the healthcare sector. The only detractor was our hedging position, with subtracted (0.79)% year-to-date to the fund’s gross performance.
Credit markets have tightened a lot since the beginning of the year and are now entering expensive territory but while dispersion normally decreases as high yield spreads tighten, it remains at an elevated level. Indeed, in this environment, issues are becoming more difficult to hide in public markets and most investors exit risks they don’t assess well. Hence we still manage to find attractive opportunities, with substantial complexity premia, in order to build an attractive and diversified portfolio.
We can definitely see numerous signs of ebullience, especially in the primary market. Credit incidents are also starting to pick up. Restructurings became more frequent after the spike in cost of capital in 2022 but in the past years they often tended to happen under the guise of disciplined liability management operations that attenuated the immediate pain for creditors and delayed some loss recognition in the future. We are now seeing more proper defaults happening, in a somehow brutal fashion, especially in the US and in Emerging Markets.
We have been several times in this part of the credit cycle in our careers. This is the moment when bond selection, or alpha, becomes crucial. Carmignac Portfolio Credit has added several new attractive positions during the third quarter - while adopting a defensive stance. We lowered both our gross and net high yield exposure in the process and built a cash buffer, focusing on defensive carry. We have no way to know how long this environment will persist, but the good news is that, historically, the longer credit markets stay expensive, the more opportunities we find in the following dislocation. We are especially excited about the potential for future outsized returns in special situations and restructurings as many of the ill-fitted balance sheets that built up during the decade preceding 2022 are still due for proper adjustments.
Our underwriting standards remain strict and we always stress-test our investment theses for risky dependences to unreliable markets on the demand or supply side, as well as the capacity to absorb input cost volatility. We feel confident about the ability for the portfolio to weather this environment of heightened trade and political uncertainty. Natural resources, financial services and CLO tranches remain our largest capital allocations and we still see fertile ground there for alpha generation. We have been investing constantly in the natural resources sector over the past decade, generating alpha regularly. The ability to withstand commodity price volatility is a key criteria selection for our positions in this corner of the economy. The financial institutions we invest in combine healthy liquidity and capitalization as well as disciplined underwriting and should withstand a recession without major issues. Finally, our CLO exposure stands at c. 8.2%. We have actively selected CLO tranches with more defensive risk characteristics, namely instruments with shorter spread duration and/or high coupons, and our exposure is well diversified across over 45 tranches.
Outlook
As we write, Carmignac Portfolio Credit’s portfolio sports a gross yield of 5.7% for a BBB- rating. As discussed above, we maintain a defensive stance with a 16.1% hedging position through CDS on high-yield indices, resulting in a conservative 21.6% net high yield exposure. Adjusted for the cost of hedging, the portfolio’s yield is closer to 5% and the rating higher up in investment grade territory. We remain opportunistic and keep an attractive portfolio, well diversified, with more than 250 bonds from more than 150 issuers, which should mitigate the impact of potential accidents.
In conclusion, we think our selective bond picking, high level of diversification and prudent positioning should help us generate attractive returns in the late stage of this credit cycle, while maintaining the optionality to seize the opportunities that will result from potential market corrections .
Carmignac Portfolio Credit
Carmignac Portfolio Credit F EUR Acc
- Recommended minimum investment horizon
- 3 years
- Risk indicator*
- 2/7
- SFDR - Fund Classification**
- Article 6
*Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. **Sustainable Finance Disclosure Regulation (SFDR) 2019/2088. The SFDR classification of the Funds may change over time.
Main risks of the fund
Fees
- Entry costs
- We do not charge an entry fee.
- Exit costs
- We do not charge an exit fee for this product.
- Management fees and other administrative or operating costs
- 0.80% 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
- 0.23% 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
| Carmignac Portfolio Credit | +6.3 | +8.6 | +10.9 | −12.7 | +3.4 | +10.8 | +20.9 |
| Reference Indicator | +3.2 | +5.7 | +9.0 | −13.3 | +0.1 | +2.8 | +7.5 |
| Carmignac Portfolio Credit | +9.6% | +4.1% | +6.7% |
| Reference Indicator | +6.7% | +1.2% | +2.0% |
Source: Carmignac at Sep 30, 2025.
Date of 1st NAV : 31/12/2018.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). The Fund presents a risk of loss of capital.
The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged.
Reference Indicator: 75% ICE BofA Euro Corporate index + 25% ICE BofA Euro High Yield index. Quarterly rebalanced.
This document is issued by, or communicated on behalf of, Carmignac Middle East Ltd, a company incorporated under the laws of the Dubai International Financial Centre with company number CL 13413 registered at GD-PB-04-01-OF-01-0, Level 1, DIFC Fund Centre, Level POD, Gate District Precinct Building 04, Dubai International Financial Centre, Dubai, United Arab Emirates and regulated by the Dubai Financial Services Authority under reference number F013638.
This document is intended solely for Professional Clients and Market Counterparties, as defined under the applicable rules of the Dubai Financial Services Authority (“DFSA”). It must not be relied upon by, or distributed to, Retail Clients or any other person.
The fund(s) referred to in this document are foreign fund(s) domiciled and regulated in Luxembourg by the Commission de Surveillance du Secteur Financier (“CSSF”). Carmignac Portfolio refers to the sub-funds of Carmignac Portfolio SICAV, an investment company under Luxembourg law, conforming to the UCITS Directive. Carmignac Private Evergreen refers to the Private Evergreen sub-fund of the SICAV Carmignac S.A. SICAV – PART II UCI, registered with the Luxembourg RCS under number B285278. Unless expressly stated otherwise, they are not domiciled in, authorised by, or subject to regulation or approval by the DFSA. The DFSA has not approved, reviewed or verified this document, the prospectus or any other fund documentation, and the authority does not accept responsibility for the information contained in them or for the merits of an investment in the fund(s).
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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.
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