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Carmignac Absolute Return Europe: Letter from the Fund Managers - Q4 2025
Over the last quarter of 2025, Carmignac Absolute Return Europe (A EUR Acc share class) realized a positive performance of +2.3%.
Market environment
European equities ended the year on a strong note, materially outperforming U.S. markets in the fourth quarter. This relative performance was supported by a tangible improvement in macroeconomic confidence: euro area inflation continued to converge toward the ECB’s 2% target, policy uncertainty eased, and the third-quarter earnings season proved resilient. Crucially, market leadership broadened beyond a narrow cohort of stocks, pointing to healthier and more sustainable equity market dynamics.
That said, economic momentum remained uneven. Services activity continued to demonstrate resilience, while manufacturing stayed subdued outside structurally supported segments such as defence and energy security, reflecting weak global demand and limited order visibility.
At the sector level, Basic Resources led performance, followed by another robust quarter for banks, driven by solid earnings delivery and ongoing capital returns. Utilities also posted strong gains, while Healthcare staged a convincing rebound after a period of underperformance as sentiment and news flow improved. Conversely, Media, Chemicals, Technology, Industrials, and Real Estate lagged the broader market.
Performance review
Against this backdrop, the portfolio delivered a positive end to the year. Performance in the final quarter was driven primarily by Financials, Healthcare, Industrials, Technology, and Materials, with the majority of sectors contributing positively. Modest losses were confined to Consumer Staples, Consumer Discretionary, and Utilities, reflecting disciplined risk management and active portfolio construction.
During the quarter, we increased exposure to Financials, which remains our highest-conviction allocation. We believe banks continue to offer attractive earnings growth at compelling valuations, supported by strong capital generation, rising dividends, and ongoing share buybacks. Exposure was increased both through core positions and selective new investments. We also added to Healthcare following a meaningful derating, and to Industrials, where we see attractive niche opportunities underpinned by strong order visibility. Within Materials, exposure was increased to both industrial and precious metals, which delivered solid returns. These additions were funded by tactical reductions in Communications, Consumer Staples, and Consumer Discretionary, where the risk-reward profile had become less attractive.
Reflecting a more supportive investment environment, gross exposure was increased through much of the quarter into the high-120% range, before being tactically reduced toward year-end to reassess opportunities. Improving earnings momentum following the third-quarter reporting season allowed net exposure to rise into the high-20% range.
On a stock level, the main contributors were:
| Long position in DSV | Strong Q3 earnings delivery and increasing confidence in value creation from the Schenker acquisition |
| Long position in Banca Monte dei Paschi | Clear earnings beat and upgraded guidance |
| Long position in Galderma | Significant positive earnings surprise |
| Long position in Sartorius | Bioprocess solutions revenues and margins exceeded expectations |
| Long position in Société Générale | Rerating driven by positive earnings revisions |
On a stock level, the main detractors were:
| Long position in Prosus | Impacted by profit-taking in Tencent |
| Long position in Relx | AI-related concerns appear excessive relative to fundamentals |
| Long position in Allegro | Modest reduction to full-year revenue guidance |
| Long position in Dell | Margin concerns linked to rising memory prices |
| Long position in Deutsche Post | Underperformed despite a more constructive broker backdrop |
Outlook
Looking into Q1 2026, we remain constructively positioned but selective. In Europe, growth is stabilising rather than accelerating, supported by resilient domestic demand, easing inflation, and a gradual shift toward more supportive fiscal policy, most notably in Germany. Euro area growth is expected to remain modest, around 1–1.5%, but this should be sufficient to underpin earnings stability and generate selective upside. Monetary easing initiated by the ECB in 2025 should increasingly feed through in 2026, while European equity valuations are expected to remain compelling relative to the U.S.
Beyond Germany, we see particularly attractive upside potential in Sweden. PMIs are firmly in expansionary territory, fiscal policy is turning more supportive, interest rates are declining, and the high proportion of variable-rate mortgages provides a powerful transmission mechanism to household demand. With an election year approaching, we see scope for positive growth and earnings surprises, reinforcing our decision to build selective Nordic exposure.
Overall, the European equity outlook supports cautious optimism. Earnings expectations for 2026 have improved to mid-single-digit growth. While this does not point to a strong cyclical upswing, it reinforces the case for active stock selection. We continue to favour banks, cyclicals, and industrials benefiting from fiscal spending, while tactically positioning for mean reversion in parts of the autos sector following a prolonged period of weakness.
In the U.S., the outlook remains fundamentally earnings-driven but increasingly constrained by valuations. AI-led growth continues to dominate market performance; however, elevated multiples leave equities more sensitive to shifts in interest rate expectations and policy uncertainty. As a result, we are broadening exposure away from concentrated technology risk toward more cyclically exposed industrial and consumer names where valuations are more supportive.
Q1 2026 is therefore likely to be shaped by the balance between maintaining exposure to proven winners and selectively exploiting opportunities among 2025 laggards, where we believe valuation dislocations offer attractive risk-reward. While banks remain our highest-conviction allocation, we are actively managing exposure following strong performance and ahead of potentially more cautious management guidance. Active positioning, disciplined risk management, and a continued focus on earnings delivery remain central to our investment approach.
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Carmignac Absolute Return Europe
Carmignac Absolute Return Europe A EUR Acc
- 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. **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
- 4.00% 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
- 2.15% 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
- 0.74% 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 Absolute Return Europe | 8.9 | 14.6 | 4.4 | -1.3 | 5.2 | 12.6 | -6.4 | 0.0 | 3.6 | -0.6 |
| Carmignac Absolute Return Europe | + 1.0 % | + 1.6 % | + 3.9 % |
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: -
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.
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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.
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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.