Carmignac P. Credit: Letter from the Fund Managers - Q4 2025
Carmignac Portfolio Credit was up 0.58% vs. 0.32% for the reference indicator during the fourth quarter, (EUR Class A share). The fund is up 6.67% for the year at the end of December vs. 3.56% for the reference indicator, for an outperformance of 3.11% (EUR Class A share).
Review of Q4 2025 performance
We are very satisfied to have achieved a meaningful outperformance in an environment where this was not an easy task. Indeed, the credit world was firmly in “end of cycle” mode during 2025, characterized by expensive market levels and an increasing number of accidents. To outperform, one needed to select strong risk rewards with good convexity while controlling the cost of risk by avoiding being caught in troublesome situations. Interestingly, the highest beta portion of the European corporate credit market, i.e. Bonds rated CCC performed very poorly in the last quarter of the year, resulting in a negative total return for 2025. This is an illustration of an environment where alpha generation is more decisive than beta exposure.
We achieved a satisfactory performance while keeping the fund very diversified and maintaining a prudent net exposure with a hedging position on high yield indices that ranged between 15% and 20% of the fund throughout the year. Our investments in financials as well as natural resources performed particularly well. We had also a large contribution from an investment in the restructuring of a French healthcare company. This investment was a detractor to the performance in 2024 but our investment thesis is now well playing out and we expect further upside going forward.
Outlook
As we enter 2026, we are optimistic for the performance prospects of the fund. Credit markets are still in end of cycle configuration, with market spreads close to their historical lows while the number of defaults and liability management exercises is picking up. This clearly mandates a prudent positioning. Indeed, at the time of writing we have a 8.8% cash buffer and 15.1% hedging position through CDS on the European high yield index. The fund remains very diversified with more than 250 positions from 150 issuers. This stance will allow us to take advantage of the dislocation that will inevitably come when the cycle turns. Similar positionings helped us outperform meaningfully in previous bear markets such as 2018 or 2020 and we are ready to take advantage of volatility in the future.
In the meanwhile, the market retains a high level of “dispersion”, meaning that we frequently come across misunderstood opportunities which present strong rewards given their limited fundamental risk. For example, in the last two months of 2025, we had opportunities to deploy capital in size at high single digit return with what we believe are low fundamental risks in a number of situations such as, for example, the refinancing of an airport concession in central America, the refinancing of the balance sheet of an asset rich French healthcare firm, or the refinancing of a harsh environment drilling rig owner in Norway. Thanks to our uniquely wide mandate and our robust analytical skillset we are managing to identify enough of these to build a diversified portfolio which currently sports a strong carry of 5.64% and an average BBB- rating. If markets stay in the same regime for 2026, we expect to be able to deliver a mid-single digit return, thanks to the added benefit of convexity. And if and when the cycle turns, as discussed above, we are positioned to take advantage of it and, as we did in previous such circumstances, will look to deliver high single digit to low double-digit returns.
We are particularly excited about the opportunities that we expect to arise from the upcoming default cycle, both in corporate bonds and CLO tranches. Indeed, the restriking of the cost of capital post 2022 has put under pressure a lot of the zombie companies of the 2010s – bad businesses with high leverage surviving thanks to low to negative interest rates. Some have defaulted but many opted instead to enter into liability management exercises where short-term fixes allow all parties to preserve optionality. More often than not, these exercises do not fix the underlying business model or balance sheet issues and the subsequent defaults tend to be even harsher as a result, which should provide us with high alpha opportunities in the next 12 to 24 months.
In conclusion, in spite of the rather expensive valuations of credit markets, we remain optimistic about the potential to generate alpha through carry and attractive idiosyncratic investments, while keeping a prudent positioning in order to be able to take advantage of potential market dislocations.
Carmignac Portfolio Credit
Carmignac Portfolio Credit A EUR Acc
- Recommended minimum investment horizon
- 3 years
- Risk indicator*
- 2/7
- SFDR - Fund Classification**
- Article 6
*Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. **The Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 is a European regulation that requires asset managers to classify their funds as either 'Article 8' funds, which promote environmental and social characteristics, 'Article 9' funds, which make sustainable investments with measurable objectives, or 'Article 6' funds, which do not necessarily have a sustainability objective. For more information please refer to https://eur-lex.europa.eu/eli/reg/2019/2088/oj.
Main risks of the fund
Fees
- Entry costs
- 2.00% One-time cost 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
- 1.20% 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
- 0.25% 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 Credit | 1.8 | 1.7 | 20.9 | 10.4 | 3.0 | -13.0 | 10.6 | 8.2 | 6.7 |
| Reference Indicator | 1.1 | -1.7 | 7.5 | 2.8 | 0.1 | -13.3 | 9.0 | 5.7 | 3.6 |
| Carmignac Portfolio Credit | + 8.5 % | + 2.7 % | + 5.6 % |
| Reference Indicator | + 6.0 % | + 0.7 % | + 1.5 % |
Source: Carmignac at Dec 31, 2025.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Reference Indicator: 75% ICE BofA Euro Corporate index + 25% ICE BofA Euro High Yield index. Quarterly rebalanced.
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.
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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.
The Management Company can cease promotion in your country anytime. Investors have access to a summary of their rights in English on the following links: UK ; Switzerland ; France ; Luxembourg ; Sweden.
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.