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Carmignac P. Flexible Bond: Letter from the Fund Managers - Q4 2025

Author(s)
Guillaume RIGEADE,Eliezer BEN ZIMRA
Published on
15 January 2026
Read time
4 minute(s) read
+3.01%
Relative performance of the Fund for A EUR share class versus its reference indicator, over 1 year.
+1.25%
Relative annualized performance of the Fund for A EUR share class versus its reference indicator over a 3 year period.
+3.31%
Relative annualized performance of the Fund for A EUR share class versus its reference indicator over a 5 year period.

In the fourth quarter of 2025, Carmignac Portfolio Flexible Bond posted a net performance of -0.28% for the A share class, while its reference indicator1 was up +0.21%.

The bond markets today

The last quarter of 2025 began unusually as the American administration was shut down from October 1st due to the failure of the Congress to vote on the federal budget. This "shutdown" significantly complicated market analysis due to the lack of employment and inflation statistics for 43 days. Despite this data shortfall, the Federal Reserve (the “Fed”) continued its rate-cutting cycle, implementing two additional cuts on top of the one already anticipated by the market in the previous quarter. However, after the government reopened following a concession by Democratic senators, the market remained perplexed by the strong statistics, with Q3 GDP growth at +4.3% and a resilient job market despite a wave of government layoffs. Hence, the yield curve steepened during the quarter, with short rates decreasing by -14 basis points, reflecting a Fed that remained accommodating, while long rates increased by +2 basis points due to favourable economic momentum.

On the Old Continent, the European Central Bank (“ECB”) opted for a pause in its monetary cycle, given rising growth and stable inflation above the ECB’s target. In anticipation of strengthened bond supply in the upcoming months, long rates accelerated during the observation period, as exemplified by the 10-year German rate, which increased by +17 basis points. At the opposite end of the globe, Japanese rates experienced a vigorous acceleration following the announcement of a $136 billion stimulus plan by new Prime Minister Sanae Takaichi, pushing the 10-year Japanese rate up by +42 basis points over the quarter. Consequently, the Bank of Japan decided to raise its benchmark rate during its December meeting to 0.75%, the highest level since 1995.

Finally, on the corporate debt front, investors maintained a strong appetite for risk, illustrated by a further tightening of credit spreads by -18 basis points on the Itraxx Xover index during the quarter.

Asset allocation

Carmignac P. Flexible Bond recorded a negative performance both on an absolute and relative basis during this quarter, posting a performance of -0.28% for the A EUR Acc share class against +0.21% for its reference in indicator. Our inflation-linked strategies and credit index hedges were the main detractors of performance during the period, in an environment marked by the American administration shutdown, depriving investors of benchmarks on inflation resilience, and a persistently strong risk appetite that contributed to the tightening of credit spreads.

Conversely, our allocation to emerging sovereign bonds and a selection of credit issuers in high yield and financial subordinated segments contributed positively to fund performance. Lastly, our prudent management of fund rate sensitivity, within a range of -2.0; -0.6 during the quarter, enabled the fund to navigate divergent rate market trajectories, particularly in December.

We fully utilized the flexibility offered by our management mandate to adapt the portfolio to a changing environment. Thus, we increased our short position on US rates, particularly on the short-end of the yield curve, while the market continued to show optimism regarding the scope of rate cuts for the coming months. Conversely, we partially took profit on our short position on Japanese rates after the sharp rise in long tails following Sanae Takaichi's election as Prime Minister.

On the credit front, we partially crystallized the gains accumulated over recent months in the financial subordinated segment while increasing our exposure to high yield credit default swaps. Finally, we increased our exposure to US inflation swaps given the market's low expectations for the upcoming months on consumer price indices.

By the end of the period, the fund's rate sensitivity stood at -0.6, reflecting our prudence concerning the evolution of long-term rates in developed economies such as Japan or the United States. The portfolio shows an embedded yield of 3.4% for an average rating of BBB, reflecting our strong appetite for hybrid instruments and idiosyncratic credit issuer selection, while also maintaining 19% protection on the high yield index to guard against potential valuation shocks due to rising geopolitical tensions.

Outlook

The market seems relatively polarized between a certain optimism regarding growth dynamics in the eurozone and Japan, and persistent pessimism about the trajectory of the United States. We believe the latter is exaggerated and does not account for the triple fiscal, monetary, and investment expenditure stimulus linked to the advent of artificial intelligence, which should maintain US growth and inflation at higher levels than anticipated. Market valuation levels also fail to account for a deteriorating geopolitical climate, which could erode assets that have been highly sought after over the past three years, and drive up commodity prices in the future, generating inflationary pressure. Given this configuration, the market offers numerous opportunities for flexible bond management like ours, capable of capitalizing on trend reversals in each sub-segment of the market and adopting hedging strategies.

Inflation-linked instruments remain one of the most attractive sub-segments in the bond market, while other corporate and government bonds show limited potential for further compression. With 20% of the portfolio invested in inflation-linked bonds and over 300 basis points of duration invested in inflation swaps, Carmignac Portfolio Flexible Bond is well-positioned to benefit from sustained or persistent inflation. Additionally, while conventional bond strategies generally suffer during inflation resurgence episodes due to consecutive adjustments in yield curves, our flexible fund allows us to adopt a neutral or negative sensitivity through derivative instruments, to exploit a rising rate context.

This flexibility enables us to maintain a cautious overall allocation with a significant weighting in money market assets, while also leveraging hedging strategies to profit from potential future market dislocations.

Source: Carmignac as at 31/12/2025. A EUR Acc share class 1ICE BofA Euro Broad Market Index (coupons reinvested). On 30/09/2019 the composition of the reference indicator changed: the ICE BofA ML Euro Broad Market Index coupons reinvested replaces the EONCAPL7. Performances are presented using the chaining method. On 10/03/2021 the Fund’s name was changed from Carmignac Portfolio Unconstrained Euro Fixed Income to Carmignac Portfolio Flexible Bond. 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 applicable entrance fee acquired to the distributor).

Carmignac Portfolio Flexible Bond

A flexible solution aiming to capture bond opportunities globally
Discover the fund page

Carmignac Portfolio Flexible Bond A EUR Acc

ISIN: LU0336084032
Recommended minimum investment horizon
3 years
Risk indicator*
2/7
SFDR - Fund Classification**
Article 8

*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

Interest Rate: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.
Credit: Credit risk is the risk that the issuer may default.
Liquidity: Temporary market distortions may have an impact on the pricing conditions under which the Fund might be caused to liquidate, initiate or modify its positions.
Discretionary Management: Anticipations of financial market changes made by the Management Company have a direct effect on the Fund's performance, which depends on the stocks selected.
The Fund presents a risk of loss of capital. Please refer to the Fund’s prospectus to view the exhaustive list of risks.

Fees

ISIN: LU0336084032
Entry costs
1.00% of the amount you pay in when entering this investment. This is the most you will be charged. Carmignac Gestion doesn't charge any entry fee. The person selling you the product will inform you of the actual charge.
Exit costs
We do not charge an exit fee for this product.
Management fees and other administrative or operating costs
1.23% 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
0.20% 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

ISIN: LU0336084032
Carmignac Portfolio Flexible Bond+4.3+5.4+4.7−8.0+0.0+9.2+5.0−3.4+1.7+0.1
Reference Indicator+1.3+2.6+6.8−16.9−2.8+4.0−2.5−0.4−0.4−0.3
Carmignac Portfolio Flexible Bond+4.8%+1.2%+1.8%
Reference Indicator+3.5%−2.2%−1.0%

Source: Carmignac at 31 Dec 2025.
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: ICE BofA Euro Broad Market index

Share

Marketing communication. Please refer to the KID/KIID, prospectus of the fund before making any final investment decisions. This document is intended for professional clients.

This material may not be reproduced, in whole or in part, without prior authorisation from the Management Company. This material does not constitute a subscription offer, nor does it constitute investment advice. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. This material has been provided to you for informational purposes only and may not be relied upon by you in evaluating the merits of investing in any securities or interests referred to herein or for any other purposes. The information contained in this material may be partial information and may be modified without prior notice. They are expressed as of the date of writing and are derived from proprietary and non-proprietary sources deemed by Carmignac to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Carmignac, its officers, employees or agents.

Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged.

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. The reference to a ranking or prize, is no guarantee of the future results of the UCIS or the manager.

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