Carmignac Portfolio Asia Discovery: Letter from the Fund Manager - Q2 2025
![[Management Team] [Author] Amol Gogate](https://carmignac.imgix.net/uploads/NextImage/0001/18/206d57f4169601a1b5be4a1556a54ff4db7b53d8.png?auto=format%2Ccompress&fit=fill&w=3840)
Carmignac Asia Discovery (A EUR Acc share class, ISIN LU03360838101) delivered +5.0% during the second quarter of 2025 versus +8.8% for its reference indicator2. This takes the year-to-date return in 2025 to -7.0% for the fund versus -1.7% for the reference indicator. Please note that these returns are in euros, and the euro has appreciated almost 14% relative to the US dollar in the first half of this year. The fund has an Article 8 designation, and at least 50% of its holdings contribute positively to the United Nations Sustainable Development Goals (UN SDGs)3. The fund prospectus excludes Chinese equities.
Performance review
In contrast to the weak first quarter of 2025, equities rebounded sharply in the second quarter. Our holdings in South Korea and Taiwan were major drivers of the positive performance while Vietnam was the main detractor. Relative to our index, we have tended to be ‘underweight’ on both South Korea and Taiwan. This has not been a top-down call but rather a result of lower GDP growth in those two countries relative to other Emerging Markets. So when we look for long-term high-growth compounders in South Korea and Taiwan, we end up finding them in them in niche industries such as AI-semiconductors where these countries have a huge global advantage as opposed to broader domestic sectors such as financials and consumer. During the second quarter, our stock selection in Taiwan partly made up for the lower weight of Taiwanese stocks relative to the index. But in South Korea, the market rally was a lot more widespread and that resulted in our stock selection not being able to make up for the lower weight than our index.
The Vietnamese market was weak in absolute terms because the initial Trump tariffs announced in early April were particularly punitive. But eventually the country’s leadership managed to negotiate a more reasonable tariff deal with President Trump which has driven a rebound in the Vietnamese market in July.
Changes to the Fund
While we did not made big changes to the fund in the second quarter, our research activity has remained exceptionally high. Over the past few years, we have witnessed an explosion in entrepreneurial energy across Emerging Markets in general and in Asia in particular. Country balance sheets and currencies have been stable and we have seen green shoots of improved governance -- for both countries and corporates. This confluence of factors has created an environment favourable for the emergence of new high-growth compounders. India has been the poster-child of this phenomenon and we have seen it gradually spread to other countries in Asia. The focus of our research is to identify such high-growth compounders and build conviction in our investment theses. The market volatility tends to give us opportunities to buy these businesses at attractive prices.
In the early part of the second quarter, the severe sell-off in AI-semiconductors allowed us to add to our holdings in Taiwan such as Jentech Precision, Elite Material and Kinik. Indian equities in general and ‘smidcaps’ in particular have been out of favour for much of this year. While large parts of that market remain expensive in terms of valuation, we have been able to find bargains for high-quality businesses. One such business where we started building a position is Leela Hotels. Leela is a luxury hotel group in India which is in the same league as the Taj and Oberoi groups but got publicly listed very recently. Leela is backed by global real estate leader Brookfields. There is a clear trend in recent years of disposable income being increasingly spent on experiences rather than products. Leela Hotels caters to this demand from both global and local tourists. Moreover, India has a severe shortage of high quality hotels rooms which allowing businesses such as Leela to invest at attractive returns.
Outlook going forward
In recent weeks, President Trump has unexpectedly targeted India through tariffs. The fund’s holdings in India have very small direct exposure to goods exported to the US but we continue to be alert to secondary effects. A few weeks ago president Trump similarly targeted Brazil only to waive the duty off one of Brazil’s most important value-added exports to the US i.e. Embraer planes. As we have all experienced, some of the best investment opportunities arise when markets are under pressure. India might find itself in that spot over the next few months and if that happens we will look to take advantage of any unjustified price dislocations.
We have approached 2025 with caution and patience. This is partly because global equity markets have had a strong run and Trump tariff announcements have injected a new form of uncertainty in global markets. We are now coming to the end of the flow of announcements which allows us to, at least, bracket the risks on specific businesses. The economic impact of the tariffs so far has been less disruptive than feared. Our conservative approach has meant the fund did not participate sufficiently in some of the upside moves especially in the second quarter. But we do think it is advisable to remain vigilant for the second half as well. Our primary focus is on building and sustaining a portfolio of high-growth compounders. For reasons described earlier, we are discovering a whole bunch of new businesses that fit our criteria. The market volatility is helping us gradually build those positions at reasonable prices.
1Performance of the A EUR acc share class ISIN code: LU0336083810. 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). From 01/01/2013 the equity index reference indicators are calculated net dividends reinvested.
2MSCI EM Asia Ex-China IMI 10/40 Capped NR index.
3To find out more about the United Nations Sustainable Development Goals, please visit https://sdgs.un.org/goals.
4Catégorie MorningstarTM: Asia ex-Japan Small/Mid-Cap Equity.
Carmignac Portfolio Asia Discovery
Carmignac Portfolio Asia Discovery A EUR Acc
- Recommended minimum investment horizon
- 5 years
- Risk indicator*
- 4/7
- 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. **The Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 is a European regulation that requires asset managers to classify their funds as either 'Article 8' funds, which promote environmental and social characteristics, 'Article 9' funds, which make sustainable investments with measurable objectives, or 'Article 6' funds, which do not necessarily have a sustainability objective. For more information please refer to https://eur-lex.europa.eu/eli/reg/2019/2088/oj.
Main risks of the fund
Fees
- Entry costs
- 4.00% 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
- 2.30% 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
- 0.25% 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 Asia Discovery | 3.8 | 17.9 | -8.9 | 10.0 | -0.2 | 25.5 | -22.4 | 12.7 | 29.6 | -7.0 |
| Reference Indicator | 6.7 | 18.1 | -11.6 | 14.4 | 5.4 | 21.3 | -11.7 | 14.9 | 9.9 | -1.7 |
| Carmignac Portfolio Asia Discovery | + 10.2 % | + 7.9 % | + 4.1 % |
| Reference Indicator | + 7.4 % | + 10.1 % | + 4.5 % |
Source: Carmignac at 30 Jun 2025.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Reference Indicator: MSCI EM Asia Ex-China IMI 10/40 Capped NR index
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