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Carmignac Portfolio Flexible Bond 5-Year anniversary

Published on
30 July 2024
Read time
5 minute(s) read

It has now been 5 years since we overhauled our fixed income flagship Fund with the integration of Guillaume Rigeade and Eliezer Ben Zimra into our investment team. Having successfully weathered various market phases (Covid, resurgent inflation, increased cost of capital, political and geopolitical stress), it's time to consider 5 key characteristics and figures of Carmignac Portfolio Flexible Bond and the fixed income markets going forward.

A fund with a double mandate: deliver a positive absolute return and outperform fixed income markets over the investment horizon

Carmignac Portfolio Flexible Bond is a fixed income fund investing globally across segments while systematically hedging the currency risk with the aim to satisfy its total return mandate over a 3-year investment horizon.
The Fund is a genuine delegation of the fixed income bucket of an allocation combining top-down views, to identify the most suited fixed income segments to the global environment, and bottom-up convictions, to maximize the alpha generation – with the insight of credit, emerging markets and developed markets teams.
In addition to a very large investment universe, our two portfolio managers also have access to a wide range of derivatives instruments to set up overlay strategies. Such instruments enable them to express marked directional convictions to fit with the economic cycle or to tactically neutralize or rise exposure in order to benefit from exceptional events.
Our strategy is also well positioned in terms of extra-financial criteria integration, as our Fund has been awarded the SRI label1 by the French government and adheres to article 8 of the SFDR directive2.
The portfolio managers have won several awards for the management of their Funds. They currently hold an "AA" rating from Citywire3,4, and their fund has a 5-star rating from the Quantalys research and analysis website.
Eliezer Ben Zimra and Guillaume Rigeade have been co-managing the Carmignac Portfolio Flexible Bond fund since July 2019. However, they have been working together as a team for more than 11 years.
Thanks to the confidence of our partners, our strategy now5 has €1.4 billion in assets under management. A success we deem is set to continue, as active management is crucial in a fixed income environment where dispersion is high, financing costs have soared, and economic agents are increasingly indebted while investors seek an allocation to funds with a moderate risk/return profile.

Outperformance of Carmignac Portfolio Flexible Bond compared to other major fixed income segments over the last 5 years:

Source: Carmignac, Bloomberg, 09/07/2024.

A proven track record in different market conditions

Since the fund overhaul and the arrival of Guillaume Rigeade and Eliezer Ben Zimra, Carmignac Portfolio Flexible Bond has delivered a positive performance of +11.28% compared with -13.16% for its reference indicator6, being fully in line with its dual mandate.
Looking into the engines of such alpha generation, we can highlight that all buckets (corporate debt, financial debt, sovereign debt) have been contributing positively to the total returns of the Fund thanks to our active management of exposures during stress periods, our attention to valuations and our seasoned selection of debt issuers. This achievement must be set against the backdrop of a particularly complex environment over the past 5 years, in which we have experienced a spread shock (Covid crisis) and an interest rate shock (inflationary crisis), resulting in a negative performance of 80% of fixed income assets globally over the period.
Moreover, another great contributor that has enabled us to expertly handle the market's stressful phases was the overlay engine. Indeed, our two portfolio managers fully exploited the limits of their mandate with the modified duration having effectively evolved between -1.5 and +8, as well as the use of credit hedging strategies (which have been fully covering our high yield exposure at times) to mitigate market downturns and benefit from recovery movements.

A rewarding and fertile market with complex challenges

Every market has challenges, and yet every market has its rewards. Fixed income markets have undergone a profound transformation over the past 5 years along with: the Covid-led sovereign debt boom, the inflationary shock of 2022, the renewed positive real rates and its corollary of heightened cost of capital, and even more polarized geopolitics. All of which will have lasting effects on the asset class.
The growing indebtedness of economic agents – and most notably of sovereign issuers which have been in the front line in the wake of ever rising deficits – means that developing a thorough appreciation of credit risk across corporate and sovereign issuers is indispensable and – that after years of spread convergence – it will increasingly become a source of added value.
Credit markets have also been brought back to life with real rates back in positive territories across most credit segments. And the latter means that carry strategies have been, since 2022, once more profitable. However, the counterpart of higher rates is the higher cost of capital and the recent rise in jumbo defaults highlights the difficulty for certain issuers to refinance debt books and the necessity to tell the wheat from the chaff, as well as to have robust restructuring capabilities.
This new world order has also brought back inflation, which had been obliterated for almost 2 decades now, to the forefront along with the notion of economic cycle. And beyond the absolute level of inflation going forward, price-related uncertainty commends for both a higher inflation premium and the necessity to select assets which can endure unforeseen prolonged periods of higher rates.
Looking at the glass half empty, the above could raise an eyebrow or two, but looking at the glass half full, this environment offers relatively attractive yields and in the fixed income world the level of yield is rather a reliable indicator of future returns provided one has the adequate capabilities in bond picking and to appreciate the complexities of the world we navigate.

Evolution of the indebtedness of US economic agents (Bn USD in nominal terms)

Source: Bloomberg, Carmignac, July 2024.

Strong convictions deliver outperformance in uncertain environment

Once again, this year, our positioning generates value in a particularly challenging market environment. We have adapted our portfolio to a stickier-than-expected inflation regime, increased pressure on long-term interest rates, and a deteriorating political and geopolitical environment.
Our Fund currently relies on three different performance drivers:

  • Carry play through an in-depth selection of the most attractive issuers in the credit universe, in the high yield, hybrid corporate, subordinated financial debt and structured credit segments. Nevertheless, we are tactically managing net credit exposure in a market that is attractive in terms of yields but on the back of richly valued spread assets.
  • Neutral modified duration exposure (three times less than its reference indicator6) with marked conviction for a steepening of yield curves as the economic slowdown should be mild and deficits aren’t expected to be tackled any time soon.
  • High exposure to inflation-linked instruments while we believe market is too optimistic regarding the forecast of disinflation trend for the months to come.

Such a positioning has served the Fund well since the beginning of the year, which once again enabled it to distinguish itself in terms of performance (+3.44% for the F EUR share class), while its benchmark returned -0.94%.

A fund particularly well-suited to the future challenges of the markets

While yields on fixed income assets are now more generous, it seems more important than ever to be active and flexible to tackle the return of the economic cycle correctly. In this sense, Carmignac Portfolio Flexible Bond fund appears to be an ideal answer to maximizing the performance of a bond investment while mitigating the level of risk embedded.
In addition to the Fund's broad investment universe, we have the toolbox of instruments and experts who know how to select the right issuers to capture the generous premiums offered by the market. On the other hand, either benchmarked or passive strategies often have a high level of embedded risk (high duration, no yield curve strategy, no hedge), so we can easily negotiate the regime changes implied by the return of the cycle capture the dislocation offered by the market.
Our fund, through its investments in high value-added credit segments (structured credit, high yield, financial debt), inflation-indexed instruments, emerging debt and the duration strategies can be initiated through derivatives, is particularly aligned with future market challenges and should therefore continue to outperform in both absolute and relative terms.

1Carmignac Portfolio Flexible Bond was awarded the French SRI label in 2021. https://www.lelabelisr.fr/en/.
2SFDR (Sustainable Finance Disclosure Regulation) 2019/2088. For more information, visit: https: //eur-lex.europa.eu/eli/reg/2019/2088/oj?locale=fr.
3Source and Copyright: Citywire. Guillauem Rigeade and Eliezer Ben Zimra are “AA” rated by Citywire for their rolling three-year risk-adjusted performance across all funds the manager is managing to 30th June 2024. Citywire Fund Manager Ratings and Citywire Rankings are proprietary to Citywire Financial Publishers Ltd (“Citywire”) and © Citywire 2024. All rights reserved.
4The reference to a ranking or prize, is no guarantee of the future results of the UCITS or the manager.
5Level of AUM as of 23/07/2024.
6Reference Index of the strategy : ICE BofA Euro Broad Market Index (Bloomberg code: EMU0).

Carmignac Portfolio Flexible Bond

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

Carmignac Portfolio Flexible Bond F EUR Acc

ISIN: LU0992631217
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: LU0992631217
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
0.78% 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: LU0992631217
Carmignac Portfolio Flexible Bond+3.6+4.7+5.7+5.1−7.7+0.1+9.7+5.4−3.0+2.0
Reference Indicator−1.6+1.3+2.6+6.8−16.9−2.8+4.0−2.5−0.4−0.4
Carmignac Portfolio Flexible Bond+6.7%+2.1%+2.6%
Reference Indicator+2.8%−1.9%−1.2%

Source: Carmignac at 30 Oct 2026.
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

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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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The Funds’ prospectus, KIDs, NAVs and annual reports are available at www.carmignac.com/en, or upon request to the Management Carmignac Portfolio refers to the sub-funds of Carmignac Portfolio SICAV, an investment company under Luxembourg law, conforming to the UCITS Directive. The French investment funds (fonds communs de placement or FCP) are common funds in contractual form conforming to the UCITS or AIFM Directive under French law.

  • In the United Kingdom: the Funds’ respective prospectuses, KIIDs and annual reports are available at www.carmignac.com/en-gb, or upon request to the Management Company, or for the French Funds, at the offices of the acilities Agent, Carmignac UK Ltd, 2 Carlton House Terrace, London, SW1Y 5AF. This document was prepared by Carmignac Gestion, Carmignac Gestion Luxembourg or Carmignac UK Ltd. FP Carmignac ICVC (the “Company”) is an Investment Company with variable capital incorporated in England and Wales under registered number 839620 and is authorised by the FCA with effect from 4 April 2019 and launched on 15 May 2019. FundRock Partners Limited is the Authorised Corporate Director (the “ACD”) of the Company and is authorised and regulated by the FCA. Registered Office: Hamilton Centre, Rodney Way, Chelmsford, Essex, CM1 3BY, UK; Registered in England and Wales with number 4162989. Carmignac Gestion Luxembourg SA has been appointed as the Investment Manager and distributor in respect of the Company. Carmignac UK Ltd (Registered in England and Wales with number 14162894) has been appointed as a sub-Investment Manager of the Company and is authorised and regulated by the Financial Conduct Authority with FRN:984288.

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  • In Belgium: This document is intended for professional clients. This content has not been validated by FSMA. The decision to invest in the promoted fund should take into account all its characteristics or objectives as described in its prospectus. This communication is published by Carmignac Gestion S.A., a portfolio management company approved by the Autorité des Marchés Financiers (AMF) in France, and its Luxembourg subsidiary Carmignac Gestion Luxembourg, S.A., an investment fund management company approved by the Commission de Surveillance du Secteur Financier (CSSF). “Carmignac” is a registered trademark. “Investing in your Interest” is a slogan associated with the Carmignac trademark. This document does not constitute advice on any investment or arbitrage of transferable securities or any other asset management or investment product or service. The information and opinions contained in this document do not take into account investors’ specific individual circumstances and must never be interpreted as legal, tax or investment advice. The information contained in this document may be partial and could be changed without notice. This document may not be reproduced in whole or in part without prior authorisation. The risks and fees are described in the KID (Key Information Document). The prospectus, KID, the net asset-values and the latest (semi-) annual management report may be obtained, free of charge, in French or in Dutch, from the management company (tel. +352 46 70 60 1) or by consulting its website or www.fundinfo.com. These materials may also be obtained from Caceis Belgium S.A., the financial service provider in Belgium, at the following address: avenue du port, 86c b320, B-1000 Brussels. The Fund (fonds commun de placement or FCP) is a common fund in contractual form conforming to the UCITS Directive under French law. Access to the Fund may be subject to restrictions regarding certain persons or countries. The Funds are not registered for retail distribution in Asia, in Japan, in North America, nor are they registered in South America. Carmignac Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Funds have not been registered under the US Securities Act of 1933. The Funds may not be offered or sold, directly or indirectly, for the benefit or on behalf of a «U.S. person», according to the definition of the US Regulation S and FATCA. In case of subscription to a fund subject to Article 19bis of the Belgian Income Tax Code (CIR92), the investor will have to pay, upon redemption of his or her shares, a withholding tax of 30% on the income (in the form of interest, or capital gains or losses) derived from the return on assets invested in debt claims. Distributions are subject to withholding tax of 30% without income distinction. In case of subscription in a French investment fund (fonds commun de placement or FCP), you must declare on tax form, each year, the share of the dividends (and interest, if applicable) received by the Fund. Any complaint may be referred to complaints@carmignac.com or CARMIGNAC GESTION - Compliance and Internal Controls - 24 place Vendôme Paris France or on the website www.ombudsfin.be.

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Carmignac Private Evergreen refers to the Private Evergreen sub-fund of the SICAV Carmignac S.A. SICAV – PART II UCI, registered with the Luxembourg RCS under number B285278.