Carmignac Portfolio Grande Europe: Letter from the Fund Manager - Q1 2026
![[Management Team] [Author] Denham Mark](https://carmignac.imgix.net/uploads/NextImage/0001/18/%5BManagement-Team%5D-Denham-Mark.png?auto=format%2Ccompress&fit=fill&w=3840)
During the first quarter of 2026, Carmignac Portfolio Grande Europe (F share class) posted a negative return of -10.28%, below its reference indicator which fell -0.94%.
Market environment
Financial markets entered 2026 with a sense of cautious optimism, extending the momentum that had built toward the end of 2025. The opening weeks of the year were supported by expectations of further policy easing, particularly in the US, and growing confidence that inflation was moving onto a more benign path. Equity markets held near elevated levels, despite already demanding valuations in several growth oriented segments.
However, beneath stable headline indices, the first quarter saw a gradual but meaningful shift in market leadership. As the quarter progressed, the macro backdrop became more challenging. Geopolitical tensions resurfaced with the US war against Iran in the Gulf, contributing to extreme volatility across asset classes, reversing some of the complacency that had characterised late 2025. Energy prices moved higher, inflation expectations increased rather than continued to decline, and sovereign bond yields rose modestly, prompting investors to recalibrate their outlook for the pace and magnitude of monetary easing.
From a fundamental perspective, corporate earnings delivered a mixed message. While activity held up reasonably well, profit growth remained uneven across sectors and regions. In Europe, earnings momentum was still concentrated in selected pockets such as financials, industrials and parts of technology, while broader growth remained modest.1
Performance review
Market conditions remained challenging for the strategy during the quarter, with volatility increasing materially in recent weeks following the escalation of geopolitical tensions in the Middle East. While sector leadership was a modest headwind, it was significantly less pronounced than in the prior year. Market leadership continued to favour Energy, Telecoms, Resources and Utilities. Sectors where the strategy has little or no exposure given their limited alignment with our quality focused investment framework.
More materially, relative performance was affected by two dynamics at the intra sector level. First, quality growth stocks continued to lag and de rate further, often despite broadly stable fundamentals, a disconnect we believe is largely unwarranted. Second, heightened concerns around AI related disruption weighed heavily on a wide range of stocks. While these concerns are justified in some cases, market reactions have been indiscriminate, creating divergence between perceived and actual risk.
Healthcare was the largest source of negative contribution. Several holdings including Straumann, Alcon, Argenx, Sartorius and Genmab, performed poorly over the period despite delivering results broadly in line with expectations and without material deterioration in their fundamental outlooks. Given our continued confidence in long term growth prospects, we retained all holdings and added modestly during periods of weakness. EssilorLuxottica was a particularly significant detractor, driven by concerns that increasing competition in smart glasses could lead to earnings downgrades. We believe this underestimates other structural drivers, including the Stellest product for childhood myopia, and we materially increased our position during the quarter. Novo Nordisk was weak despite a strong launch of its oral weight loss treatment; however, its contribution to performance was limited as position sizing had already been reduced prior to the quarter. Following mixed data from its next generation molecule and increased longer term competitive risk, we exited the remaining holding in February. In contrast, several lower growth healthcare names we do not own such as Novartis, Roche and GSK performed relatively well, representing an additional relative headwind.
Within Information Technology, ASML was a notable positive contributor. However, this was more than offset by sharp declines across software holdings, despite our ongoing reductions in exposure. Price adjustments have been severe, with some large cap names experiencing declines of more than 30% year to date. While we continue to believe AI will affect software business models over time, leading platforms retain strong defensive positions and long term relevance. Elsewhere, disappointing results from Dassault Systemes led to further reductions. In contrast we added modestly to Bechtle, the German IT service company, following what we view as an overdone sell off driven by cautious guidance.
Industrials also detracted despite strong performances from select holdings such as Schneider Electric and Prysmian within the electrification theme. Data companies RELX and Experian were adversely affected by perceptions of AI disruption. We disagree with this assessment, particularly given their data driven business models and pricing power. We significantly increased RELX during the period of weakness ahead of strong results, which subsequently drove a rebound and resulted in a positive contribution. Experian did not recover to the same extent and was the largest detractor in the sector; however, we maintained our position given its strong data moat. Elsewhere, Kion, where we had expected a cyclical recovery, was impacted by broader uncertainty around the European economic outlook and geopolitical developments, leaving the stock trading close to trough valuation levels.
Beyond the sector level adjustments discussed above, activity during the period included selective additions to financials, notably UBS, Erste Bank and Fineco. To fund these moves, we reduced exposure to Euronext and Deutsche Börse, both of which had performed relatively well amid increased market volatility. We also materially reduced Unilever following a solid performance earlier in the quarter, redeploying capital into areas offering more attractive risk reward profiles. This included increasing exposure to Novonesis after share price weakness despite strong results and a confident outlook, as well as increasing our holding in Galderma, taking advantage of a private equity placing to build a more meaningful position.
What is our outlook for the coming months?
Looking ahead, the first quarter of 2026 has highlighted a market that is becoming more discerning. Valuations leave limited room for disappointment, and the balance between monetary support, fiscal impulses and geopolitical risks will remain a key driver of market direction. In this context, current analysts’ consensus expectations for earnings to accelerate and grow by about 13% on average for European markets in 2026 are starting to seem quite optimistic. Consequently we are increasingly focused on stocks where there is clear evidence that margins and volumes can improve sustainably in a less supportive macro environment. We expect that selectivity and a disciplined focus on fundamentals are likely to play a more important role for the rest of the year.
At the same time after material underperformance in recent months, European quality stocks appear materially oversold, trading at valuations that offer an increasingly attractive entry point for long term investors. This broad derating has occurred despite generally solid operational delivery, underscoring a disconnect between fundamentals and market pricing.
While concerns around AI driven disruption are legitimate in certain areas, we have proactively reduced our exposure to the most vulnerable segment, software, which now represents less than 5% of the portfolio. At the same time, the market’s heightened caution around AI is creating opportunities elsewhere, notably in companies such as RELX and Experian, where we see structural resilience rather than disruption risk. Encouragingly, recent weeks suggest that investor sentiment may be starting to turn for a number of high quality names, with the market beginning to respond more constructively to improving outlooks in areas such as healthcare and life sciences, including Alcon, Novonesis, Sartorius and Straumann.
We maintain our exclusive focus on companies demonstrating high sustainable profitability and reinvestment, and the best sustainability standards, as we believe these names will deliver the highest and most consistent long-term profit growth. The good news is that the recent pullback in the valuations of such companies offers the long-term investor an opportunity to add to holdings at attractive valuations, which we have been doing.
Source: Carmignac, Bloomberg, 31/03/2026
Carmignac Portfolio Grande Europe
Carmignac Portfolio Grande Europe F EUR Acc
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- 5 years
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- 4/7
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Performance
| Carmignac Portfolio Grande Europe | 11.0 | -9.6 | 35.5 | 14.4 | 22.5 | -20.6 | 15.5 | 12.0 | -0.2 | -10.3 |
| Reference Indicator | 10.6 | -10.8 | 26.8 | -2.0 | 24.9 | -10.6 | 15.8 | 8.8 | 19.4 | -0.9 |
| Carmignac Portfolio Grande Europe | + 2.1 % | + 1.6 % | + 6.7 % |
| Reference Indicator | + 11.2 % | + 9.0 % | + 8.4 % |
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 Europe NR index
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