Carmignac Portfolio Investissement: Letter from the Fund Manager - Q3 2026

Over the third quarter, the Fund gained +5.0%, compared with +2.3% for its reference indicator, bringing year-to-date performance to +19.9%, versus +16.9% for the reference indicator.

Global equity and sovereign bond markets moved in opposite directions during the third quarter of 2026. While equities proved resilient and globally delivered positive returns, government bond markets came under significant pressure as persistent inflation, elevated public debt levels and stronger-than-expected economic activity pushed yields sharply higher. Equity markets, by contrast, continued to benefit from resilient corporate earnings, with profit expectations revised higher in both the US and emerging markets, particularly within technology. In several markets, earnings growth actually outpaced share-price appreciation, allowing valuations to compress despite positive equity returns.

Artificial intelligence (AI) remained the dominant theme, although leadership changed significantly during the quarter. July saw a correction in semiconductors and Asian AI hardware following their exceptional performance in the first half of the year. As the quarter progressed, market leadership broadened towards hyperscalers and software companies.

More broadly, style leadership remained unstable, rotating repeatedly between high-growth technology stocks and more defensive or value-oriented segments. This created a less directional market environment than in the first half of the year.

Geopolitical tensions also returned to the forefront through energy markets. Renewed instability in the Middle East pushed Brent crude back above $100 per barrel, adding to inflation concerns. The broader macroeconomic backdrop nevertheless remained resilient. US growth continued to be supported by strong business investment, notably AI-related capital expenditure, while September business surveys pointed to improving activity in both the US and the euro area.

Over the third quarter, the Fund gained +5.0% during the quarter, compared with +2.3% for its reference indicator, bringing year-to-date performance to +19.9%, versus +16.9% for the reference indicator.

Portfolio adjustments made ahead of the summer contributed positively. Following the exceptional first-half rally in semiconductors, we took profits in several higher-beta hardware names while maintaining exposure to higher-quality, relatively lower-beta tech companies such as Nvidia. We also used periods of weakness to increase exposure outside hardware. These changes proved beneficial as leadership was unstable during the quarter.

Behind the fund’s quarterly performance, the technology sector remained the main drivers with Atlassian and Nvidia among the strongest contributors to both absolute and relative performance. Asia Vital Components also contributed positively, reflecting continued demand for advanced cooling solutions across the AI infrastructure value chain.

Beyond technology, our portfolio of defensive healthcare and financial stocks played its role effectively during the market volatility in July. Our positions in Cencora, McKesson and Intercontinental Exchange contributed positively to performance, after which we took some profits.

The main relative detractor was our underweight exposure to hyperscalers, which benefited from the rotation in market leadership during the quarter. Some hardware positions also weighed on performance, notably Nitto Boseki and Lotes. Although we had reduced our exposure to these companies ahead of the summer, the remaining positions were still affected by the correction in some of the strongest-performing areas of the AI supply chain.

One of the defining features of the current market is its extreme concentration. A small group of mega-cap growth stocks now accounts for a disproportionate share of both index returns and market beta, while correlations across the broader equity universe have fallen and performance dispersion has increased.

This creates an unusual market structure: narrow at the index level, but much more fragmented beneath the surface. As a result, a growing share of the benchmark’s sensitivity is concentrated in a limited number of high-beta stocks, creating a “beta deficit” across the rest of the market. When these leaders outperform, the broader equity universe can struggle to keep pace with the index even when underlying fundamentals remain solid.

Facing this unusual market set-up, we have gradually built a more barbell-shaped portfolio over recent weeks. On one side, we maintain exposure to the AI leaders. On the other, we have increased exposure to companies perceived as AI losers, or simply less dependent on the AI cycle, where valuations and expectations are often more attractive. This allows us to retain meaningful participation in our strongest structural conviction while building greater diversification across different sources of return.

On the AI winners side, we continue to favour the hardware segment, where demand visibility remains strong and bottlenecks across the value chain continue to support pricing power and earnings growth. Our focus is increasingly on quality leaders with strong cash-flow generation and differentiated competitive advantages, rather than simply the highest-beta beneficiaries of the cycle.

This includes core positions such as Nvidia and Broadcom, as well as more specialised enablers across memory, components and infrastructure, including SK Hynix, Asia Vital Components and Amphenol. We took advantage of the market pullback at the beginning of the quarter to add to several of these positions at more attractive valuations. Conversely, we remain more cautious on hyperscalers, where unprecedented capex requirements create greater uncertainty around future returns. This is compounded by their growing dependence on frontier AI companies continuing to expand compute demand at an exceptional pace, adding another layer of uncertainty around the sustainability of the investment cycle. We have therefore significantly reduced our exposure, exiting Microsoft and Meta, and trimming positions in Alphabet and Amazon.

On the other side of the barbell, we continue to diversify towards financials, healthcare and industrials, focusing on specific pockets of opportunity rather than broad sector calls.

In financials, we favour payment and market-infrastructure businesses such as Mastercard, Adyen, S&P Global and Tradeweb, complemented by Berkshire Hathaway and selected emerging-market banks to provide additional diversification.

In healthcare, we continue to favour pharmaceutical distributors such as McKesson and Cencora, alongside selected undervalued biotech companies. In industrials, we have increased exposure to attractively valued, more cyclical businesses such as Ingersoll Rand, Epiroc and IDEX, where expectations already reflect a relatively subdued operating environment.