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Carmignac P. Flexible Bond: Letter from the Fund Managers

Author(s)
Guillaume RIGEADE,Eliezer BEN ZIMRA
Published on
April 10, 2025
Read time
3 minute(s) read
+2.89%
Carmignac P. Flexible Bond’s performance in the 1st quarter of 2025 for the A EUR Share class.
+3.64%
Relative performance of the Fund for A EUR shareclass versus ICE BofA ML Euro Broad index (EUR) in the 1st quarter of 2025.
+5.04%
Relative annualized performance of the Fund for A EUR shareclass versus ICE BofA ML Euro Broad index (EUR) over 3 years period.

In the first quarter of 2025, Carmignac Portfolio Flexible Bond posted a net performance of +2.89% for the A shareclass, while its benchmark1 was down -0.75%.

The bond markets today

In the same way as at the end of 2024, volatility was still a major issue on the fixed income markets at the start of the year. However, the trend has been reversed in the dynamics of the different regions, with an upward revision of the growth outlook for the euro zone, while the supremacy of the US zone has gradually been called into question overall. The common denominator in these divergent trajectories was undeniably linked to the Trump administration's assumption of power at the head of the world's leading power. The latter has indeed stifled investors' excessive optimism with the possibility of widespread tariffs, but also with a more isolationist outlook on interactions with former Western allies. In addition to raising fears of a reduction in the purchasing power of American consumers and a rise in inflation in the US in the future, this change of course in US policy has also had the effect of creating a need for greater independence on the part of other NATO member countries in order to ensure their defense needs in a more independent manner. The announcement of a massive investment plan in Germany and the abandonment of measures to curb indebtedness followed by other defense plans by its European neighbors (France, Spain, Sweden, etc.) boosted the growth prospects of the zone and consequently the level of long-term rates. The latter therefore tightened by +37 bp on the old continent (German 10-year rate) in contrast to their US counterparts, which fell by -36 bp during the quarter due to increased fears over the ability of the American consumer to absorb the future impact of more restrictive customs barriers. The central banks did not spring any major surprises during the observation period, with two cuts for the European Central Bank and a continuation of the pause in the Federal Reserve's rate cut cycle. On the other hand, the two institutions revised their inflation outlooks at the end of 2025 upwards to +2.3% for the euro zone and +2.7% for the United States respectively. Finally, credit assets suffered from the return of volatility at the end of the quarter with a widening of credit spreads of +39bp over the period on the Itraxx Xover index.

Asset allocation

At the start of the year, our strategy fully benefited from its flexible management mandate to deliver a positive performance despite an unfavorable configuration in the bond markets. Indeed, the fund delivered a performance of +2.89% over the quarter (share class A EUR Acc) against -0.75% for its benchmark indicator, with the best contributor to this outperformance being the interest rate hedging strategies. Our strong preference for US rates at the beginning of the year over their European counterparts was an important factor contributing to performance, particularly at the time of the announcement of the German investment plan, which generated an upward surge in rates on the old continent. On the contrary, US rates benefited from the gradual deterioration of leading indicators, which increasingly incorporate concerns related to the potential evolution of customs barriers. On the other hand, we also benefited from the positive contribution of our inflation-indexed instruments, which appreciated with the upward revision of future inflation prospects among central bankers but also in leading indicators. We adopted a dynamic management of modified duration during this first quarter, fluctuating between 0.4 and 3.3 through optional strategies. We closed the quarter at the upper end of this range at 3.3 following the increased sensitivity to European rates at the end of the period. We also gradually reduced our exposure to risky assets in March by reducing our weighting in high-yield credit and subordinated financial bonds, and by strengthening our credit hedges.

Outlook

The current environment presents many uncertainties arising from the decisions of the Trump administration, which could result in more volatility in risky assets. This is all the more worrying as the valuation levels on carry assets are moving in a high range, leaving little prospect of appreciation in the future. The change in policy across the Atlantic is also a catalyst for inflation through a strong stimulation of consumption in the short term and the prospect of less fluidity in trade in the longer term. Finally, the imbalance between supply and demand is expected to widen even more sharply in the future, with the isolationist policies and defense or infrastructure plans of various states creating a negative environment for long-term rates. We are therefore maintaining a cautious position in terms of modified duration by favoring inflation-indexed assets that have the potential to appreciate in view of their valuation and geopolitical outlook. Finally, we favor defensive assets and hedging strategies in an environment where the level of remuneration is now less accommodating on risky assets.

Source: Carmignac as at 31/03/2025. A EUR Acc shareclass, code ISIN: LU0336084032.
1ICE BofA Euro Broad Market Index (coupons reinvested). On 30/09/2019 the composition of the reference indicator changed: the ICE BofA ML Euro Broad Market Index coupons reinvested replaces the EONCAPL7. Performances are presented using the chaining method. On 10/03/2021 the Fund’s name was changed from Carmignac Portfolio Unconstrained Euro Fixed Income to Carmignac Portfolio Flexible Bond.
Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations. Performances are net of fees (excluding applicable entrance fee acquired to the distributor).

Carmignac Portfolio Flexible Bond

A flexible solution aiming to capture bond opportunities globally
Discover the fund page

Carmignac Portfolio Flexible Bond A EUR Acc

ISIN: LU0336084032
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

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.
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.
Discretionary Management: Anticipations of financial market changes made by the Management Company have a direct effect on the Fund's performance, which depends on the stocks selected.
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: LU0336084032
Entry costs
1,00% 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
1,23% 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
0,20% 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: LU0336084032
Carmignac Portfolio Flexible Bond+2,9+5,4+4,7−8,0+0,0+9,2+5,0−3,4+1,7+0,1
Reference Indicator−0,8+2,6+6,8−16,9−2,8+4,0−2,5−0,4−0,4−0,3
Carmignac Portfolio Flexible Bond+3,5%+3,8%+1,2%
Reference Indicator−1,5%−1,6%−1,3%

Source: Carmignac at Mar 31, 2025.
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: ICE BofA Euro Broad Market index

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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.

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.