Carmignac Portfolio Grandchildren: Letter from the Fund Managers - Q1 2026
Carmignac Portfolio Grandchildren (A EUR Acc) delivered a performance of -9.11% in the first quarter of 2026, underperforming its reference indicator, which had a performance of -1.71%.
Market environment during the period
During the first quarter of 2026, global developed equity markets were broadly stable at the index level, but masked significant underlying dispersion across sectors and styles. Investor sentiment became more cautious as markets grappled with a shift in the artificial intelligence (AI) narrative, rising geopolitical tensions and questions around the sustainability of growth expectations.
A key feature of the quarter was a sharp reassessment of AI-driven growth. While the theme remains structurally intact, investors began to question the pace of returns relative to the scale of capital expenditures, as well as the potential for disruption across existing business models. This led to increased volatility and multiple compression in parts of the Technology sector, particularly within software and data-driven companies. This shift also extended to the “Magnificent 7”, which saw more mixed performance after a prolonged period of strong outperformance.
At the same time, geopolitical risks resurfaced, notably with the escalation of tensions in Iran, which drove a sharp increase in energy prices and supported strong performance from the Energy sector. The sharp rise in oil prices in March triggered an inflation shock, pushing bond yields higher and leading to a renewed compression in valuation multiples, particularly for long-duration assets.
This sudden shift in the macro backdrop disrupted some of the market’s most crowded trades, accelerating unwinds and amplified volatility, reflecting not only a deterioration in risk sentiment but also a repositioning across asset classes.
European markets in particular lost momentum, as rising geopolitical tensions and renewed concerns around energy security weighed on the regional growth outlook and investor confidence.
How did we fare in this context?
During the first quarter of 2026, the Fund underperformed its reference indicator in what has been a particularly challenging and fragmented market environment.
The Fund’s performance over the period was primarily affected by a sharp, narrative-driven sell-off linked to fears of AI disruption. In early February, investor sentiment shifted abruptly from viewing AI as a productivity enhancer to fearing it could become an end-to-end substitute for existing software and workflow solutions.
This shift weighed heavily on several of our holdings, particularly across software and financial infrastructure. Names such as ServiceNow, SAP and Salesforce, as well as S&P Global, Mastercard and Intercontinental Exchange, were impacted as concerns around AI monetisation, rising capital expenditure and potential business model disruption led to multiple compression and a broader rotation away from growth-oriented sectors. As a result, Technology and Financials were the main detractors over the period.
At the beginning of the quarter, Microsoft was one of the Fund’s largest holdings. However, considering higher capital expenditure expectations, a potential deceleration in software growth and the risk of disintermediation from new AI entrants, we significantly reduced our position. Despite this adjustment, Microsoft remained one of the weakest contributors to performance over the period. Financial infrastructure companies were similarly impacted by concerns around data and workflow disintermediation, which we believe are overstated relative to underlying fundamentals and regulation constraints.
Healthcare also weighed on performance, failing to provide its usual defensive characteristics amid de-grossing flows and rising inflation concerns. EssilorLuxottica (-30%) and Doximity (-45%) were among the main detractors, impacted respectively by consumer weakness and softer growth visibility linked to higher AI-related costs.
In parallel, the Energy sector performed strongly, supported by higher oil and gas prices following the escalation of geopolitical tensions in Iran. While the Fund does not have exposure to this sector due to its sustainable investment approach, this positioning reflects our long-term commitment and resulted in a relative headwind over the period.
In contrast, parts of the portfolio delivered solid performance. Consumer Staples was the main contributor, with holdings such as Procter & Gamble, Colgate and Unilever benefiting from a rotation toward defensive, cash-generative businesses in a more uncertain macroeconomic environment.
European leaders ASML and Prysmian stood out for their resilience, supported by robust earnings and the reiteration of their outlooks. Both companies benefited from strong order visibility and structural demand drivers, reinforcing investor confidence despite heightened market volatility.
Outlook & positioning
Recent underperformance has been primarily driven by a sharp derating of quality growth equities rather than any deterioration in underlying fundamentals. A combination of macroeconomic uncertainty and rapidly shifting market narratives has led to indiscriminate multiple compression across high-quality companies, particularly within Technology and FinTech. We believe this environment is temporary and does not reflect the intrinsic strength of the businesses we own.
In response, we have actively adjusted the portfolio to capture opportunities. Within Technology, we have reassessed exposure to areas potentially disrupted by AI, reducing positions in selected software names such as SAP, while increasing our exposure to RELX, where we see AI as an enabler that can strengthen its competitive positioning. We also initiated a position in Broadcom, a key beneficiary of AI adoption through its leading role in custom chips and networking infrastructure for hyperscalers.
In Healthcare, we exited Novo Nordisk following continued share price weakness after a failed drug trial and rising competitive pressure from Eli Lilly. We redeployed capital into Galderma, a global leader in dermatology, following the removal of a private equity overhang at an attractive entry point. The company is delivering strong growth above its end markets, supported by robust guidance and improving medium-term prospects.
At the same time, the escalation of the conflict in Iran has added uncertainty to the macroeconomic outlook. While comparisons have been drawn with previous shocks, the starting point today is materially different, with quality equities already significantly de-rated. This limits the scope for further multiple compression, while companies with strong pricing power, resilient fundamentals and defensive characteristics are well positioned to navigate the current environment and potentially regain market leadership.
Importantly, the fundamentals of our holdings remain strong. The portfolio continues to exhibit resilient earnings growth, high returns on capital and robust cash flow generation, with limited balance sheet risk. The recent correction has also provided an opportunity to reinforce our highest-conviction positions at more attractive valuations.
In this context, we do not view the current environment as a structural challenge, but rather as a temporary phase where market dynamics have overshadowed fundamentals. As conditions normalise and investor focus returns to earnings quality and visibility, we expect the portfolio’s strong fundamentals and disciplined positioning to translate into improved performance.
Source: Carmignac, Bloomberg, data as of 31/03/2026. Performance of the A EUR Acc share class ISIN code: LU1966631001. Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Carmignac Portfolio Grandchildren
Carmignac Portfolio Grandchildren A EUR Acc
- Recommended minimum investment horizon
- 5 years
- Risk indicator*
- 4/7
- SFDR - Fund Classification**
- Article 9
*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
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
- 1.71% 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
- 0.30% 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 Grandchildren | 15.5 | 20.3 | 28.4 | -24.2 | 23.0 | 21.9 | -5.1 | -9.1 |
| Reference Indicator | 15.5 | 6.3 | 31.1 | -12.8 | 19.6 | 26.6 | 6.8 | -1.7 |
| Carmignac Portfolio Grandchildren | + 4.9 % | + 3.9 % | + 8.5 % |
| Reference Indicator | + 14.5 % | + 10.7 % | + 12.4 % |
Source: Carmignac at 31 Mar 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.
Reference Indicator: MSCI World NR index
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