Carmignac Portfolio Merger Arbitrage Plus: Letter from the Fund Managers - Q1 2026

Author(s)

Stéphane DIEUDONNÉ,Fabienne CRETIN-FUMERON

Published on

April 13, 2026

Read time

2 minute(s) read

Dear investors,

During the first quarter of 2026, despite a highly volatile market, Carmignac Portfolio Merger Arbitrage Plus (I EUR Acc share class) delivered a positive performance of +0.97%.

Market environment

The first quarter of 2026 was marked by a volatile and increasingly uncertain market backdrop, with both equity and credit markets coming under pressure. February saw a sharp correction in technology and software stocks (down around 15%), driven by growing concerns over the impact of AI on business models and a broader rotation away from growth. This weakness extended into March, as geopolitical tensions in the Middle East and concerns around the private credit market further weighed on investor sentiment, triggering de-risking across asset classes.

During the first quarter of 2026, investors experienced:

A fall of 9.1% on the S&P 500 and 12.8% on the Nasdaq between the peak and trough¹
A fall of 2.3% on the US High Yield index between the peak and trough²

In this context, merger arbitrage experienced short-term technical volatility during periods of stress in February and early March, as investors reduced exposure and certain spreads widened. These moves were primarily liquidity-driven rather than reflective of any deterioration in deal fundamentals. As the quarter progressed, spreads tightened, supported by a steady pace of deal completions, ongoing M&A activity and the re-emergence of bidding dynamics in several transactions.

Overall, in a quarter characterised by equity drawdowns, credit weakness and heightened macro uncertainty, merger arbitrage remained driven by deal-specific catalysts and demonstrated limited sensitivity to broader market movements.

Performance review

The Merger Arbitrage strategy demonstrated resilience during the quarter as spreads continued to be driven by idiosyncratic, deal-level catalysts rather than directional equity or credit markets. While market volatility led to temporary spread widening in certain names, this did not reflect higher deal break risk. The performance during the quarter was driven by:

Completion of several big deals throughout the quarter: CyberArk Software, Dayforce, Comerica and Tegna.
Spread volatility where it occurred (Warner Bros Discovery, Electronic Arts) was technical and liquidity-driven, not reflective of deal break risk
M&A pipeline remained robust. Despite a more modest number of deals, the total deal value rose by 40%³ compared to the same period last year, driven by large transactions including Commerzbank (€27bn), Telecom Italia (€18bn) and Beazley (€9bn)
Bidding wars re-emerged: Paramount's improved offer for Warner Bros Discovery, the Trian vs. Victory Capital battle for Janus Henderson, and Basepoint Capital's revised terms for International Personal Finance
Importantly, our deal selection avoided any transaction failures during the quarter

That said, a handful of spreads proved more volatile than average, detracting modestly to quarterly performance, notably Norfolk Southern, Clearwater Analytics and Soho House.

Outlook

The past year has been characterised by a record wave of mega-deals, reflecting renewed corporate confidence and a willingness to secure strategic assets. Structural drivers such as the pursuit of scale, synergies and long-term growth positioning remain firmly in place. The first quarter confirmed this trend, and we expect 2026 to continue to show sustained M&A momentum.

The policy backdrop has also become more supportive. A more pragmatic antitrust stance in the US has encouraged corporates to accelerate transactions and improve execution visibility, reducing uncertainty around deal completion timelines.

At the same time, financial sponsors are back in force, supported by record levels of dry powder and increasing pressure to deploy capital. Private Equity firms accounted for more than 30% of announced deal volumes in 2025, including landmark LBOs, leveraging improved financing conditions and their ability to manage complex execution risks.

In this environment, elevated deal flow combined with attractive spreads creates a particularly compelling environment for merger arbitrage, offering visible, risk-adjusted return potential and meaningful diversification benefits, especially valuable in today’s uncertain macro and geopolitical landscape.

The Merger Arbitrage Team

Source: Carmignac, Bloomberg. Data as of 31/03/2026.

¹SPX Index and CCMP Index from 28/01/2026 to 30/03/2026.
²IBOXHY Index from 18/02/2026 to 27/03/2026.
³Source: Carmignac, Bloomberg. Data as of 31/03/2026.

Carmignac Portfolio Merger Arbitrage Plus I EUR Acc

ISIN: LU2585801330

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

Equity: The Fund may be affected by stock price variations, the scale of which is dependent on external factors, stock trading volumes or market capitalization.

Arbitrage: Arbitrage seeks to benefit from such price differences (e.g. in markets, sectors, securities, currencies). If arbitrage performs unfavorably, an investment may lose its value and generate a loss for the Sub-Fund.

Risk associated with the Long/Short Strategy: This risk is linked to long and/or short positions designed to adjust net market exposure. The Fund may suffer high losses if its long and short positions undergo simultaneous unfavourable development in opposite directions.

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.

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: LU2585801330

Entry costs: We do not charge an entry fee.

Exit costs: We do not charge an exit fee for this product.

Management fees and other administrative or operating costs: 1.12% of the value of your investment per year. 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: 0.23% 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

ISIN: LU2585801330


Carmignac Portfolio Merger Arbitrage Plus	+1.0	+4.6	+3.7	+3.2


Carmignac Portfolio Merger Arbitrage Plus	+4.5%	-	+4.2%

Source: Carmignac at Mar 31, 2026.
Date of 1st NAV : 14/04/2023.
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: -

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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.

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