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Carmignac Portfolio Patrimoine Europe: Letter from the Fund Managers

Author(s)
Mark DENHAM,Marie-Anne ALLIER
Published on
15 October 2024
Read time
3 minute(s) read
+2.38%
Carmignac Portfolio Patrimoine Europe’s performance in the 3rd quarter of 2024 for the A EUR Share class.
+2.75%
Reference indicator’s performance in the 3rd quarter of 2024.
+8.01%
Year-to-date performance vs +6.08% for the reference indicator.

Over the third quarter, Carmignac Portfolio Patrimoine Europe achieved a positive return of +2.38%, although it slightly underperformed its reference indicator, which posted a gain of +2.75%. This resulted in a year-to-date performance of +8.01% for the fund, compared to +6.08% for the reference indicator1.

European Markets review

The third quarter of 2024 concluded with positive returns despite several episodes of market volatility. In early August, stocks took a hit due to weaker U.S. economic data, an interest rate hike from the Bank of Japan, and thin summer liquidity. However, the much-anticipated commencement of the Federal Reserve’s (Fed) rate-cutting cycle in September, along with a less aggressive stance from Japanese policymakers and new stimulus measures in China, alleviated investor concerns and fuelled a strong stock market rally towards the end of the quarter. This stock price upturn was led by economically sensitive cyclical stocks, anticipating future recovery. In Europe, the European Central Bank (ECB) implemented its second rate cut, but central bankers face a dilemma: resilient euro-area inflation contrasts with a worsening economic outlook.

In more detail, as the market leadership was taken up by cyclical sectors, previously strong areas of the market, notably Healthcare and Technology lagged. Mirroring the trends in the equity markets, the credit markets have reaped the rewards of high carry and low spreads. Amid a backdrop of relatively optimistic risky assets, the sovereign markets were significantly more pessimistic about the economic trajectory, resulting in a sharp decline in rates over the quarter.

How did we fare in this context?

The fund continued to maintain its momentum, delivering a positive performance over the period with less volatility compared to the market.

The end of July and the beginning of August was a period that truly tested the resilience of our fund amidst a whirlwind of market volatility. During this period, equity markets, including the Stoxx 600, experienced a sharp decline, plummeting by 6% in just three days while Japanese equities lost nearly 20%. However, our fund demonstrated notable resilience, limiting its decline to a mere 1.3%. This performance was the result of strategic positioning. One of the key contributors was our volatility calls. On August 5, 2024, the VIX, often referred to as the "fear gauge," saw its largest intraday spike ever recorded. We had been holding these options for a while, anticipating that the low implied volatility in equities presented an attractive opportunity in the event of market turbulence. Additionally, our puts on equity indices played a crucial role in reducing our exposure to the falling equity markets. These tactical hedges further mitigated the impact of the market downturn on our fund.

But the story doesn't end there. As the markets began to rebound, our fund was well-positioned to capitalize on the recovery. Our effective stock picking allowed us to seize opportunities and drive performance. Moreover, our exposure to commodities, particularly gold, served as a robust performance driver during this period. Gold, often seen as a safe-haven asset, provided stability and growth amidst the market's fluctuations and tensions in the Middle East. Finally, our cautious positioning on interest rates, characterized by a low modified duration, limited our ability to fully capitalize on the decline in interest rates in Europe. However, our bond selection in the high yield and structured credit sectors contributed to the Fund's performance.

Outlook

The European economy continues to be sluggish, and we anticipate weak but steady growth through year-end. The austerity measures enforced by Brussels in response to budgetary excesses, especially in Italy and France, are likely to hinder economic growth. Additionally, the ongoing situation in the Middle East could impact commodity prices, thereby influencing inflation rates across Europe. However, it is evident that in the coming months, market attention—even in Europe—will be primarily focused on the situation in the United States. We believe that while US growth is decelerating, it is not falling off a cliff. Rapid disinflation is enabling the Fed to maintain the economy’s soft landing through consecutive rate cuts.

In this scenario, we remain constructive on equities with exposure around 30%. Indeed, in a scenario of gradual economic slowdown and global monetary easing, risky assets should continue to perform well as long as we don’t have a recession. However, similarly to the third quarter, we anticipate increased market volatility. The main risks to equities include overly optimistic corporate earnings expectations and uncertainties related to the US elections, which justify maintaining partial hedges. Regarding interest rates, we maintain a low overall modified duration as markets already reflect a negative outlook on growth.

To strengthen our overall portfolio construction, we have implemented several diversification strategies. As mentioned, we have hedged part of our equity market exposure via puts options on major equity indexes as well as call options on volatility. We have also allocated around 5% of our portfolio to commodities through ETCs on gold, silver, and copper. Our long-term view is that inflation will be higher on average over the next decade compared to the 2010s. To address this, we have invested in inflation products, particularly inflation swaps. These instruments help protect the portfolio against unexpected inflation spikes and potential geopolitical tensions.

Source: Carmignac, Bloomberg, data as of 30/09/2024. Performance of the A EUR Acc share class ISIN code: LU1744628287. Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. 1Reference Indicator: 40% STOXX Europe 600 (Reinvested Net Dividends) + 40% ICE BofA All Maturity All Euro Government + 20% ESTER capitalized. Quarterly Rebalanced. Until 31/12/2021, the reference indicator was 50% STOXX Europe 600, 50% BofA Merrill Lynch All Maturity All Euro Government Index. The performances are presented using the chaining method. 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 Patrimoine Europe

An all-weather European Fund
Discover the fund page

Carmignac Portfolio Patrimoine Europe A EUR Acc

ISIN: LU1744628287
Recommended minimum investment horizon
3 years
Risk indicator*
3/7
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.
Interest Rate: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.
Currency: Currency risk is linked to exposure to a currency other than the Fund’s valuation currency, either through direct investment or the use of forward financial instruments.
Credit: Credit risk is the risk that the issuer may default.
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: LU1744628287
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
1.80% 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
0.46% 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: LU1744628287
Carmignac Portfolio Patrimoine Europe+3.8+4.9+7.3+2.1−12.7+9.5+13.9+18.7−4.8
Reference Indicator+4.3+8.3+5.1+9.5−11.0+10.2+2.4+16.4−4.8
Carmignac Portfolio Patrimoine Europe+6.9%+0.9%+4.4%
Reference Indicator+8.2%+3.3%+4.3%

Source: Carmignac at 30 Oct 2026.
Date of 1st NAV : 29/12/2017.
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: 40% MSCI Europe NR index + 40% ICE BofA All Maturity All Euro Government index + 20% €STR Capitalized Index. Rebalancing Frequency: Quarterly

Share

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.

Morningstar Rating™ : © Morningstar, Inc. All Rights Reserved. The information contained herein: is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Access to the Funds may be subject to restrictions regarding certain persons or countries. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the material or availability of this material is prohibited. Persons in respect of whom such prohibitions apply must not access this material. Taxation depends on the situation of the individual. 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.
The risks, fees and ongoing charges are described in the KID (Key Information Document). The KID must be made available to the subscriber prior to subscription. The subscriber must read the KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Funds present a risk of loss of capital.

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.

  • In Switzerland: the prospectus, KIDs and annual report are available at www.carmignac.com/en-ch, or through our representative in Switzerland, CACEIS (Switzerland), S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Montrouge, Nyon Branch / Switzerland, Route de Signy 35, 1260 Nyon.

  • 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.

The Management Company can cease promotion in your country anytime. Investors have access to a summary of their rights at section 5 entitled "summary of investor rights" on the following links: UK ; Switzerland ; France ; Luxembourg ; Sweden. Belgium (French) ; Belgium (Dutch)

For Carmignac Portfolio Long-Short European Equities: Carmignac Gestion Luxembourg SA in its capacity as the Management Company for Carmignac Portfolio, has delegated the investment management of this Sub-Fund to White Creek Capital LLP (Registered in England and Wales with number OCC447169) from 2nd May 2024. White Creek Capital LLP is authorised and regulated by the Financial Conduct Authority with FRN : 998349.

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.