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Carmignac Sécurité: Road to 2019

[Management Team] [Author] Ney Keith
Author(s)
Keith NEY
Published on
17 January 2019
Read time
2 minute(s) read

Outlook 2019

With Carmignac Sécurité’s benchmark1 offering a negative yield-to-maturity close to -0.25%, the investment universe, short-maturity Eurozone fixed income, is severely challenged.

Since the ECB’s tax on savers started in June 2014 and to help escape this unprecedented era of financial repression, we have used a barbell strategy: Balance longer maturities and lower credit ratings with cash and cash equivalents.

The sell-off in risky assets during 2018 has increased the opportunity set available in the credit markets. Although it is too early to jump head first into the asset class considering the deteriorating growth outlook, numerous political fights, and ongoing tightening of monetary policy, some of our favourite investments have sold off to attractive levels.

Turning strategy into action

High yield corporate bond

We benefit from a strong conviction in the telecom sector with attractive yield and the support of potential deleveraging following their recent asset disposal. We took a position in the Swedish debt collection and credit services business, which should benefit from an economic slowdown while offering yields +500bp over German rates.

High yield government bond

Our strong convictions lie mostly onto Greek government bonds across the maturity spectrum. Substantial progress implementing structural reforms and improved growth outlook ought to drive further ratings upgrades. The medium-term debt relief measures for Greece, including maturity extension and interest deferrals, further strengthen the quality of the Greek sovereign debt.

Structured credit exposure

European CLOs - Collateralized Loan Obligation - remain a broken asset class, following regulatory constraints and crisis scars, which offer attractive spread levels and a near complete absence of historical defaults. Our investments are mostly in AAA/AA, least risky tranches of CLOs.

Investment grade corporate credit

This portfolio is highly rated and invested in short-term maturity, designed to take minimal risk and offset the riskier side to our negative yield survival barbell strategy. In our opinion, recent widening has made names more attractive. We are invested in names that offer for example: modest cyclicality and modest leverage, or a funding support agreement.

Investment grade government bond

After continued downside surprises to European data, we decided to simplify the portfolio construction by exiting all directional shorts and reducing the size of French and German relative yields strategies. With reduced conviction, in the short term, on the direction of rates, we prefer to minimize the exposure of the portfolio and allow new position to be implemented when data are more supporting.

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. RISK OF CAPITAL LOSS: The portfolio does not guarantee or protect the capital invested. Capital loss occurs when a unit is sold at a lower price than that paid at the time of purchase. 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. The Fund presents a risk of loss of capital.

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1 EuroMTS 1-3 Year (EUR)


Source: Carmignac, 11/01/2019

Promotional article. This article may not be reproduced, in whole or in part, without prior authorisation from the management company. It does not constitute a subscription offer, nor does it constitute investment advice. The information contained in this article may be partial information, and may be modified without prior notice. Past performance is not necessarily indicative of future performance. 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 Fund presents a risk of loss of capital. The risks, fees and ongoing charges are described in the KIID (Key Investor Information Document). The Fund's prospectus, KIIDs, NAV and annual reports are available at www.carmignac.com, or upon request to the Management Company. Access to the Fund may be subject to restrictions with regard to certain persons or countries. The Fund is not registered in North America, nor in South America. The Fund has not been registered under the US Securities Act of 1933. The Fund 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/or FATCA. In Switzerland, the prospectus, KIIDs and annual report are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland), S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Paris, succursale de Nyon/Suisse, Route de Signy 35, 1260 Nyon. The KIID must be made available to the subscriber prior to subscription. In the United Kingdom, for the French Funds, these documents are also available at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R. This material was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013). This article was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013).