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. **Sustainable Finance Disclosure Regulation (SFDR) 2019/2088. The SFDR classification of the Funds may change over time.
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
- 0.23% 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 | +6.7 | +8.2 | +10.6 | −13.0 | +3.0 | +10.4 | +20.9 | +1.7 | +1.8 |
| Reference Indicator | +3.6 | +5.7 | +9.0 | −13.3 | +0.1 | +2.8 | +7.5 | −1.7 | +1.1 |
| Carmignac Portfolio Credit | +8.5% | +2.7% | +5.6% |
| Reference Indicator | +6.0% | +0.7% | +1.5% |
Source: Carmignac at Dec 31, 2025.
Date of 1st NAV : 31/07/2017.
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: 75% ICE BofA Euro Corporate Index + 25% ICE BofA Euro High Yield index. Rebalancing Frequency: Quarterly