Carmignac Portfolio Emerging Patrimoine

• US data sent mixed signals with July nonfarm payrolls disappointed, meanwhile, inflation data surprised on the upside, with core CPI rising to +3.1% YoY and PPI accelerating to +0.9% in July. Nevertheless, Q2 GDP was revised higher to +3.3%, supported by stronger personal consumption.• Despite sticky inflation, Powell’s dovish tone at Jackson Hole emphasized rising labor market risks and reinforced expectations of a September rate cut. However, President Trump’s attempt to remove Governor Lisa Cook, raised concerns about Fed independence and contributed to steeper yield curves.
• In August, yield curves steepened on both sides of the Atlantic. In the US, the move was pronounced, with the 2Y falling by -34 bps versus -14 bps for the 10Y, as markets priced in rate cuts. In Germany, the shift was modest, with the 2Y down -2 bps and the 10Y up +3 bps.
• August was another good month for emerging assets. Central banks maintained an accommodative stance, with rate cuts in countries such as Mexico and Indonesia. This supportive policy backdrop contributed to a rally in both EM local and external bonds over the month. While EM Equities gave back part of their solid gains.
• On currencies, the dollar eased in August amid Fed rate cut expectations. Emerging market FX outperformed, supported by attractive carry, though the Indonesian rupiah fell by more than 1% in a single day at month-end, prompting central bank intervention.

• During the month, the Fund posted a positive absolute performance, outperforming its benchmark that ended in negative territory. • The fund benefited from the solid performance of its equity holdings, notably in Brazil and China, with the Brazilian utility Eletrobras and the Chinese flash sale company VIPSHOP posting strong results.
• Our credit selection also bolstered performance particularly our hard currency emerging debt (Côte d’Ivoire, Egypt) and some private issuance in energy sector. However, we slightly suffered from our positions on Argentine debt and our credit protections.
• Our local rates strategies contributed positively to performance, supported by long positions in Brazilian and Hungarian rates.
• On the currency front, the Fund benefited from the appreciation of the Brazilian real and the Hungarian forint against the euro, which helped offset the negative impact of the weakness of the Indonesian rupiah over the month.

• In a context marked by geopolitical and fiscal uncertainty in several countries, we still anticipate that the major central banks, notably EM central banks will maintain an accommodative monetary policy. As a result, we are maintaining a moderate level of modified duration, at around 320 basis points.• Regarding local rates, we favour countries with high real rates such as Colombia, South Africa and Brazil, as well as Eastern European countries such as Poland, Hungary and the Czech Republic. On the other hand, we are taking short positions on develop market rates notably US rates.
• In hard currency emerging debt, we have a preference for HY issuers, maintaining a diversified exposure across countries such as Côte d’Ivoire, Colombia, Turkey and South Africa, which offer attractive yields and favorable factors, leading us to believe they are mispriced by the market.
• Although the credit segment offers attractive carry, particularly in energy and financials, we maintain hedging through iTraxx Crossover given tight credit spread valuations.
• On the Equity side, we lowered slightly the equity exposure, taking profits on names that had performed well since the start of the year (Eletrobras, Elite Material). Conversely, we increased exposure to names that had underperformed and where valuations appeared attractive (Didi, Hynix, BCA).
• Finally, in FX, we remain cautious, with high allocation in the euro, complemented by some decent exposure to Central and Eastern European currencies. We also hold selected positions in EM currencies, notably the commodity exporters from Latin America (CLP, BRL) and Asia (IDR).