Carmignac P. Credit: Letter from the Fund Managers
Carmignac Portfolio Credit was up 1.82% during the second quarter of 2025 versus 1.79% for the reference indicator, for an outperformance of +0.03%. On a year to date basis, the fund was up 3.66% while its reference indicator performed +2.07% which represents an outperformance of +1.59%.
Review of Q2 2025 performance
Credit markets experienced volatility in the second quarter, first linked to the fear of heavy trade disruptions, then to the unfolding of the conflict in the Middle East. So far, the market stress has largely subsided as the actual reality of trade impediments now appears manageable for most companies and the conflict has stabilized. High yield spreads in Europe ended the quarter tighter than they started it. The primary market closed for a couple of weeks but reopened promptly after that and no backlog of issuance has built.
The portfolio performed well during this period. Our natural resources portfolio in particular is behaving well operationally despite lower energy prices, thanks to our focus on selecting issuers with low oil price breakeven economics and balance sheets able to weather the cycle. We sold approximately one third of our hedges through CDS on high yield indices as the cost of protection started to rise and have since bought back most of this protection at much lower levels.
Despite the relatively tight level of market indices, we find credit markets still conducive for bond picking and alpha generation. Although spreads and volatility have climbed down, investors remain alert to the potential of political disruption and this helps keeping complexity premia at healthy levels. Companies are anxious to execute their financing plans, leading to a strong supply side on the primary market and healthy issuance premia.
We made a number of interesting new investments with attractive risk rewards during the quarter. To offer a concrete example, we had the opportunity to deploy capital in the debut bond issuance of one of the largest European defense companies. This company had debut ratings at BB+ despite already sporting what we consider to be investment grade metrics as well as an excellent business position. It paid a meaningful premium above the average spread of BB issuers to issue its EUR 1b and $1B bonds maturing in 5 years and it will likely be upgraded to investment grade in the next 24 months. Our base case is refinancing at the end of the non-call period of 2 years, with a return in EUR in excess of 6.5% over this period, meaningfully overcompensating a modest fundamental risk.
The portfolio remains very well diversified, with more than 250 bonds from more than 150 issuers. We always stress-test our investment theses for risky dependences to unreliable markets on the demand or supply side, as well as the capacity to absorb input cost volatility and we feel confident about the ability for the portfolio to weather this environment of heightened trade and political uncertainty. The high level of diversification of the fund should mitigate the impact of potential accidents. We also believe headlines, overreactions and volatility are likely to be a big source of opportunities. This quarter proved once again that keeping some hedges when the markets are tight is invaluable in giving us precious dry powder to reposition the fund through periods of market volatility. Hence, we maintain a c. (19)% hedging positions through CDS on high-yield indices.
We have been investing constantly in the natural resources sector over the past decade, generating alpha regularly. The ability to withstand commodity price volatility is a key criteria selection for our positions in this corner of the economy. The financial institutions we invest in combine healthy liquidity and capitalization as well as disciplined underwriting and should withstand a recession without major issues. Finally, our CLO exposure stands at c. 8.6%. We have actively selected CLO tranches with more defensive risk characteristics, namely instruments with shorter spread duration and/or high coupons, and our exposure is well diversified across over 45 tranches.
Outlook
The portfolio currently yields 6.19% for an average BBB- rating. Including the cost of hedging, the net yield is in excess of c.5.5% with an average robust investment grade rating. We think this is an attractive level of carry that should ensure solid outcomes within our investment horizon in a wide range of market scenarios. If the current turbulence turns into a dislocation, the carry should mitigate to a great extent a repricing of the portfolio with a 12 months horizon, giving us leeway to reposition. Conversely, in a stable to tightening market, one could easily envision a mid to high single digit return.
Finally, we expect restructurings to be an incremental source of alpha in tough markets making refinancings more difficult. Companies that overlevered during the decade of very low cost of capital preceding 2022 are increasingly having to resize and restructure their balance sheets. This has started already in 2024, with a number of companies managing to take semi-consensual routes to liability management exercises. The biggest contributor to performance was an investment in a restructuring situation in the healthcare industry which was a detractor to performance in 2024. Our investment thesis is starting to play out and we expect further performance during 2025. We expect 2025 to see more proper restructurings as it is becoming more and more difficult for a number of companies to kick the can down the road and we can think of a number of large balance sheets where investors are likely too complacent about the magnitude of adjustments needed to get to sustainable quanta of debt. This should provide us with asymmetric opportunities to generate meaningful alpha, as distressed debt can be one of the most attractive sectors of the credit world at the right moments of the cycle.
In conclusion, we think our selective bond picking, high level of diversification and prudent positioning should help us weather rough credit markets and put us in the position to seize on the resulting opportunities.
Carmignac Portfolio Credit
Access the entire credit spectrum for maximum flexibilityDiscover the fund pageCarmignac 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% 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
- 1,20% 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
- 0,25% 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
| Carmignac Portfolio Credit | 1.8 | 1.7 | 20.9 | 10.4 | 3.0 | -13.0 | 10.6 | 8.2 | 3.7 |
| Reference Indicator | 1.1 | -1.7 | 7.5 | 2.8 | 0.1 | -13.3 | 9.0 | 5.7 | 2.1 |
| Carmignac Portfolio Credit | + 8.2 % | + 4.1 % | + 5.6 % |
| Reference Indicator | + 5.4 % | + 1.4 % | + 1.4 % |
Source: Carmignac at Jun 30, 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.
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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.