Carmignac Portfolio Merger Arbitrage Plus: Letter from the Fund Managers - Q4 2025

Author(s)

Stéphane DIEUDONNÉ,Fabienne CRETIN-FUMERON

Published on

20 January 2026

Read time

2 minute(s) read

Dear investors,

During the final quarter of 2025, Carmignac Portfolio Merger Arbitrage Plus (I EUR Acc share class) delivered a positive performance of +0.86% and finished the year up by 4.61%.

Market environnement

The year was overall favourable for the Merger Arbitrage strategy, which demonstrated strong resilience in a sometimes volatile and uncertain market environment. After several more subdued years, 2025 marked a genuine inflection point for global M&A activity, with total deal value rising by more than 40% and the number of announced transactions increasing by 12% year on year.

This recovery proved broad-based and diversified, both across sectors and geographies, and was sustained through to the final month of the year. Deal volumes remained elevated, with several consecutive months above historical averages. The United States accounted for the majority of total deal value, driven by a number of mega-deals, while Europe and Asia, particularly Japan, contributed significantly to transaction volumes, confirming a renewed diversification in geographic activity.

From a sector perspective, Industrials emerged as the primary driver of activity, supported by accelerating investment in electrification, infrastructure and automation linked to the development of artificial intelligence. Healthcare also stood out, underpinned by structurally strong demand, consolidation needs and rapid scientific advances.

Finally, in an environment of gradually declining interest rates, private equity players confirmed their strong return, accounting for a share of acquirers above their historical average and remains a key pillar underpinning M&A activity as we move into 2026.

Mega Deals in the US in Value and Volume

Performance review

2025 was a strong year for Carmignac Portfolio Merger Arbitrage Plus despite a challenging and volatile market environment. The Fund delivered a performance of +4.61% over the year, representing an excess return of nearly +2.5% above the risk-free rate, while maintaining low volatility below 2% and a contained maximum drawdown of 1.35% during the April market turmoil.

As the Fund approaches its third anniversary in April, it has continued to deliver steady and consistent returns, with a cumulative performance of +11.90% since inception, equivalent to an annualized return of +4.21%. The strategy has maintained a very low correlation with both equity and credit markets, as reflected by an equity beta of 0.03, reinforcing its role as an effective portfolio diversifier.

Performance over the year benefited from the resolution of the Hess litigation, the earlier than expected completion of the Enstar transaction, and several bidding war situations, all of which contributed positively to returns. Conversely, the failure of a few transactions, most notably Bavarian Nordic in the final quarter, weighed on performance.

As shown in the graph below, the bidding wars helped more than offset the negative impact of terminated deals. Moreover, thanks to disciplined risk management, prudent position sizing, and portfolio diversification, the impact of these events remained contained.

DISTRIBUTION OF RETURNS IN 2025

Outlook

The past year was further characterized by a record wave of mega deals, reflecting renewed corporate confidence and a willingness to secure strategic assets. The structural drivers underpinning these transactions, including the pursuit of scale, synergies and long-term growth positioning, point to sustained M&A momentum into 2026.

The policy backdrop has also become more supportive. A more pragmatic antitrust stance in the US has encouraged corporates to accelerate transactions and improve execution visibility, reducing uncertainty around deal completion timelines.

At the same time, financial sponsors are back in force, supported by record levels of dry powder and increasing pressure to deploy capital. Private Equity firms accounted for more than 30% of announced deal volumes in 2025, including landmark LBOs, leveraging improved financing conditions and their ability to manage complex execution risks.

Finally, easing inflation and declining interest rates are improving debt affordability and supporting higher leverage transactions, while strong corporate balance sheets allow strategic buyers to pursue growth and synergies with confidence.

In this environment, elevated deal flow combined with attractive spreads creates a particularly compelling environment for merger arbitrage, offering visible, risk-adjusted return potential and meaningful diversification benefits, especially valuable in today’s uncertain macro and geopolitical landscape.

The Merger Arbitrage Team

Source: Carmignac, Bloomberg. Data as of 31/12/2025.

Carmignac Portfolio Merger Arbitrage Plus I EUR Acc

ISIN: LU2585801330

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

Equity: The Fund may be affected by stock price variations, the scale of which is dependent on external factors, stock trading volumes or market capitalization.

Arbitrage: Arbitrage seeks to benefit from such price differences (e.g. in markets, sectors, securities, currencies). If arbitrage performs unfavorably, an investment may lose its value and generate a loss for the Sub-Fund.

Risk associated with the Long/Short Strategy: This risk is linked to long and/or short positions designed to adjust net market exposure. The Fund may suffer high losses if its long and short positions undergo simultaneous unfavourable development in opposite directions.

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.

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: LU2585801330

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: 1.12% of the value of your investment per year. This estimate is based on actual costs over the past year.

Performance fees: 20.00% max. of the outperformance if the performance is positive and the net asset value exceeds the high-water mark. 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: 0.23% 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: LU2585801330


Carmignac Portfolio Merger Arbitrage Plus	+4.6	+3.7	+3.2


Carmignac Portfolio Merger Arbitrage Plus	+4.6%	-	+4.2%

Source: Carmignac at 31 Dec 2025.
Date of 1st NAV : 14/04/2023.
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: -

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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.

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