Carmignac P. Credit: Letter from the Fund Managers - Q3 2026
Carmignac Portfolio Credit was down -2.35% (A EUR Acc shareclass) during the third quarter of 2026 versus -2.38% for the reference indicator. The fund is down -0.37% year-to-date vs. -0.92% for the reference indicator.
Review of Q3 2026 performance
The negative performance of the fund was chiefly due to the adverse movement of interest rates. There could very well be continued volatility on the rate front in the coming months but the current levels offer, in our view, a sufficiently attractive risk reward to have slightly increased rate duration.
There have been no incidents or spike in the cost of risk of the portfolio so far this year. Defaults are multiplying across our investment universe, but our issuer and security selection have been robust. The underperformance versus the reference indicator comes in large part from our hedging position through crossover which has cost -45bps to the fund so far in 2026 as well as our exposure to names sensitive to French sovereign spreads, namely in the banking and, to a lesser extent, healthcare services.
More than two years ago, after the 2024 dissolution of the French National Assembly, anticipating a sharp rise in French sovereign risk, we reduced significantly our exposure to French banks, only to see their spreads tighten. We thought that we had been too cautious and that it was widely understood that well-run French banks, understanding very well their government’s fiscal profligacy, would manage their sovereign exposure accordingly. Hence we wrongly anticipated that they would offer, in an environment where other credit risks seemed underestimated, a safe carry. However, while we still consider their exposure to be manageable, we’ve reduced our exposure to limit the impact of potential volatility.
Despite its cost so far this year, we are still comfortable maintaining a meaningful hedging position as we believe we are well into the final innings of the credit cycle. As mentioned above, defaults have been multiplying all year long and the CCC space has been weak. As of early October, we are seeing signs of the wider high yield market losing buoyance and starting to grip. One of the largest HY deals on record, despite generous relative pricing, recently had one of the worst first day performances in recent leverage financed history. Other deals priced at the wide of their initial price target range, a certain sign of weak demand. Credit cycles can turn because of exogenous events creating panic amongst an expensive and undisciplined market (such as what happened in 2020). But bull markets can also die of “old age” when fundamentals deteriorate triggering underperformance which in turns provokes outflows and creates a self-perpetuating loop as tight liquidity questions the solvency of more issuers - and at the time of writing, we are seeing deleveraging and outflows across the special situations universe.
Outlook
As per previous quarters, the name of the game in this environment remains “defensive carry”. Our playbook has been to maintain a prudent portfolio, well diversified and focused on issuers which still offer an attractive reward. The average rating of the portfolio is investment grade at BBB- for a yield of 6.53%. Our hedging position through CDS on the Xover (euro high yield) index is sized at 18.7% of the portfolio. Whilst the market stays in the current regime, the carry should offer a satisfactory return while offering some protection against further adverse interest rate moves. And if and when the market turns, we will be in a solid position to monetize our hedges and redeploy the portfolio to seize opportunities.
Credit markets can be irrational for a long time but the consolation is that the longer they stay irrational, the better the opportunity set when the cycle turns. Despite the jump in the cost of capital post 2022, opportunities in the distressed space in recent years have been muted by precarious consensual Liability Management Exercises and an excess of capital dedicated to this asset class. We think these conditions are increasingly less sustainable and that this compartment of our investment universe in particular is bound to offer a lot of potential for alpha.
Sources: Carmignac, 30/09/2026. Performance of the A EUR acc share class ISIN code: LU2020612904.
1Reference indicator: 75% BofA Merrill Lynch Euro Corporate Index, 25% BofA Merrill Lynch Euro High Yield Index.
216/08/2019. Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations. Performances are net of fees (excluding possible entrance fees charged by the distributor). Marketing communication. Please refer to the KID/prospectus of the fund before making any final investment decisions.
Carmignac Portfolio Credit
Carmignac Portfolio Credit F USD Acc Hdg
- 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 | −0.4 | +8.8 | +9.9 | +12.6 | −11.3 | +3.9 | +12.3 | +2.8 |
| Reference Indicator | −0.9 | +3.6 | +5.7 | +9.0 | −13.3 | +0.1 | +2.8 | +0.1 |
| Carmignac Portfolio Credit | +8.1% | +3.5% | +5.1% |
| Reference Indicator | +4.6% | +0.4% | +0.7% |
Source: Carmignac at Sep 30, 2026.
Date of 1st NAV : 16/08/2019.
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. Rebalancing Frequency: Quarterly
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.
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