Carmignac Portfolio Patrimoine: Letter from the Fund Managers - Q2 2026

Carmignac Portfolio Patrimoine (A USD Hedged Acc) returned +4.86% in the second quarter of 2026, underperforming its reference indicator, which was up +6.81%.

The second quarter of 2026 was marked by a strong recovery in global risk assets despite an uncertain geopolitical backdrop. As tensions in the Middle East gradually eased and oil prices retreated sharply from their April highs, investor sentiment improved significantly, allowing markets to refocus on corporate fundamentals and the continued strength of the artificial intelligence (AI) investment cycle.

Equity markets delivered robust returns, led by technology and semiconductor companies as investors gained confidence that AI-related capital expenditure would remain largely unaffected by geopolitical developments. US hyperscalers continued to increase investment plans for AI infrastructure and data centers, supporting a sharp upgrade in global earnings expectations. Emerging markets were the standout performers, driven by exceptional gains in Korea and Taiwan, where semiconductor leaders benefited from booming demand for AI hardware. US, European and Japanese equities also posted strong gains, supported by resilient earnings, improving economic confidence and easing geopolitical risks.

Central banks remained cautious: the Federal Reserve (Fed) kept rates unchanged while maintaining a hawkish stance under its new Chair Kevin Warsh, the ECB resumed its tightening cycle with one rate hike, and the Bank of Japan continued its gradual policy normalisation. Fixed income markets diverged across regions: US yields moved higher on the Fed's hawkish stance, while European government bond yields declined following the de-escalation in the Middle East. Yield curves flattened on both sides of the Atlantic, while credit markets delivered solid returns as spreads tightened against a backdrop of resilient corporate earnings and improving risk sentiment.

On commodity markets, Oil prices fell sharply as expectations of a reopening of the Strait of Hormuz eased concerns over global energy supply, while gold retreated as geopolitical risk premiums faded and confidence in central bank credibility improved.

The Fund delivered a solid quarter, rising by more than 4%, in an environment that ultimately proved supportive for risk assets.

The main driver of absolute performance was our equity allocation. The Fund benefited from the rebound in global equity markets, with technology and semiconductor-related names leading the way. TSMC and SK Hynix were among the strongest contributors, reflecting continued investor appetite for the AI supply chain. However, our equity portfolio was deliberately built around a more balanced “barbell” approach, combining exposure to structural technology winners with more defensive, high-quality companies, particularly in healthcare. This diversification did not pay off over the full quarter. Healthcare was the main drag on performance, with names such as McKesson and Cencora down around 10%. That said, we began to see early signs of a reversal in June, as market leadership started to broaden beyond the most crowded technology stocks. This reinforced our view that a more diversified equity exposure remains appropriate after the strong rally in momentum names.

Our macro equity overlay also detracted from performance. Gold miners weighed on returns, even though we had already significantly reduced our exposure. In addition, our equity index options, which are held as a form of portfolio insurance, naturally cost performance in a quarter where global equities rallied strongly and volatility remained subdued. While these hedges did not contribute during the period, we continue to see value in maintaining convex protection given stretched positioning and low market volatility.

In fixed income, the contribution was more balanced. Our prudent duration management added value, as did our inflation-linked exposure. However, the Fund’s CDS index hedges detracted from performance, as credit spreads continued to tighten. These positions are designed to protect the portfolio against a broader deterioration in risky assets, and therefore acted as a cost in a quarter characterised by strong risk appetite. On currencies, our relatively limited exposure to the US dollar weighed somewhat towards the end of the quarter, as the currency recovered. However, this was partly offset by positive contributions from selected emerging-market currencies, notably in Latin America, as well as from exposure to the Chinese renminbi.

The resilience of global growth, easing energy prices and the continued acceleration of AI-related investment remain constructive for risk assets. However, after the strong rally of recent months, market technicals appear increasingly stretched. Positioning has become crowded in momentum stocks, while depressed volatility and correlations leave markets more vulnerable to abrupt rotations. Against this backdrop, we remain constructive on equities but are becoming increasingly selective in where we deploy risk.

Within equities, we have gradually reduced the portfolio's beta by increasing diversification while maintaining a meaningful net exposure of around 40%. Although we remain constructive on the long-term AI investment theme, we have become more selective following an increasingly narrow market rally. Tactically, this has led us to reduce exposure to hyperscalers and move away from the most speculative semiconductor names. Instead, we are focusing on high-quality market leaders with a durable competitive advantage and more attractive valuations, such as Nvidia and Broadcom, which remain among the portfolio’s largest positions.

At the same time, we have selectively increased exposure to high-quality companies outside the technology sector, particularly in financials and healthcare, where valuations remain attractive and earnings momentum continues to improve. We believe this broadening of market leadership creates a richer opportunity set for active stock selection.

In fixed income, we continue to favour relative-value opportunities across regions rather than taking significant directional duration risk. The appointment of Kevin Warsh may lead to greater policy and market volatility, while we believe markets continue to underestimate the persistence of inflationary pressures. Although yield curves have flattened since the beginning of the year, we expect this trend to gradually reverse. Resilient growth, persistent inflation and a rebuilding of the term premium amid deteriorating public finances should place increasing upward pressure on longer-dated yields. Consequently, we remain cautious on long-dated US rates while maintaining exposure to inflation-linked assets. Our overall duration remains broadly neutral, combining long positions in Europe with short exposure in the United States and the United Kingdom. We have also increased our exposure to US real rates, which appear attractive at current levels, while remaining cautious on French government bonds given France’s deteriorating fiscal outlook.

Elsewhere, we remain prudent in credit markets, where spread levels continue to offer limited compensation for downside risks after the recent tightening. Our preference is therefore to express portfolio risk primarily through equities while maintaining meaningful protection in credit. In currencies, our strongest conviction remains a structurally weaker US dollar. We believe recent geopolitical developments and the gradual deterioration in US fiscal credibility argue for a weaker dollar over the medium term. Consequently, we maintain only limited dollar exposure, primarily implemented through options, while favouring the Japanese yen and selected emerging market currencies, particularly in Latin America. We have also started to rebuild our exposure to gold at the very end of the quarter, as depressed investor positioning and a potentially less hawkish Fed improve its risk-reward profile.