In a highly volatile environment, the credit asset class has benefited from its defensive features to post a clearly positive performance, unlike other assets such as international equities. With central banks having begun their cycle of rate cuts and credit spreads having tightened over the past 24 months, what can we expect from this asset class going forward?
An elevated yield despite tighter credit spreads
- Corporate bonds have seen a substantial increase in yields since the inflation shock of 2022, revitalizing an asset class that had lost momentum over the previous decade.
- While yields have normalized somewhat over the past 24 months as credit spreads have tightened, current market conditions suggest that they will stabilize at these historically high levels.
- Market valuations appear to integrate generous rate cut expectations for the coming months, while credit spreads are at levels that no longer warrant further tightening.
- We believe that this asset class therefore offers investors a unique opportunity to build pockets of return in excess of 3% across the investment grade spectrum and 5% in high yield, and even more for actively managed funds such as Carmignac P. Credit (see figure 1), whose annual return since launch is similar to the average performance of European equities over the past 20 years.
Figure 1: Yields on investment grade and high yield indices are gravitating above their historical averages, as are those of offered by Carmignac P. Credit fund
Proven resilience during recent market events
- Credit has earned a prominent place in investor allocations thanks to higher embedded yields, replacing other previously favoured asset classes such as real estate and deposit accounts.
- This new status as an essential building block within an allocation has strengthened the asset class from a technical standpoint, with the abundance of inflows enabling it to better absorb market events, whether microeconomic (issuer default) or macroeconomic (war, political events etc.).
- While we expect default rates to rise, we believe that the market is now in a position to absorb such events without contagion, as demonstrated by the recent major defaults in recent months (Altice, Atos, Ardagh, Intrum, etc.), which had no impact on other components of the indices.
- Since the beginning of the year, credit assets have posted very limited drawdown, unlike other assets during the various market events that have occurred (see figure 2), a trend that we believe should continue given the strength of technical factors.
- Finally, while periods of recession have historically been synonymous with credit underperformance, we believe that this risk is currently low, given the current fiscal stimulus policies on both sides of the Atlantic, but also the leeway available to central bankers to support the economy in the event of a downturn.
Figure 2: The resilience of the credit asset class significantly improved thanks to more favourable technical factors
Dispersion remains high within the asset class
- The fixed income universe is substantially larger than the equity universe. For example, in the United States, there are more than 500,000 bonds for only 8,000 equities on the various US indices1.
- This bulk of supply creates market inefficiencies that offer relevant opportunities for active credit portfolio managers who are able to capture complexity premiums linked to the specific characteristics of certain companies.
- Indeed, many issuers seeking to raise capital on the fixed income market are forced to offer excess yield to compensate for poor market coverage by brokers, analysts and investors.
- This phenomenon is particularly pronounced for companies that issue only one bond on the credit market and are therefore mostly ignored by investors and often absent from indices.
- These inefficient markets thus make it possible to build fixed-income strategies offering high returns without increasing risk.
Figure 3: Evolution of the yield to maturity of three issues – Shrinking of the issuer complexity premium
Financial bonds at the core of our strategy
- Among the various value cohorts available to corporate bond investors, we believe that the financial sector offers outstanding characteristics for generating attractive returns.
- Indeed, this sector, which remains stigmatized since the global financial crisis, offers an attractive risk-adjusted premium and significant depth.
- European banks have worked hard to reduce risk while strengthening their balance sheets to meet regulatory requirements, which has led them to almost triple their capital ratios since 2008, while benefiting from a more virtuous environment that has enabled them to improve their profitability (Figure 4).
- The momentum is also favourable, with industry consolidation on the horizon following a wave of announcements of domestic and cross-border mergers.
- All of these arguments therefore support exploring the entire capital structure of European banks, particularly through subordinated securities,** which offer higher yields than high-yield credit for issuers that are generally rated Investment Grade.**
Figure 4: European banks have improved their financial strength and profitability over the past decade
Performance potential remains as strong as ever
- Corporate bond funds are, in our view, more relevant than ever as an alternative for building a diversified allocation.
- In addition to offering proven resilience to various episodes of stress, these assets provide significantly higher returns than other defensive investment solutions (structured products, sovereign debt, deposit accounts, real estate vehicles).
- Beyond the benefits offered by this high recurring return, the abundance of issues on the primary market should continue to provide us with significant alpha generation through the capture of complexity premiums.
- Furthermore, we believe that credit should be included in any asset allocation, as it appears to be the only asset class that combines greater visibility in an uncertain environment with positive real returns.
- Active management funds such as Carmignac Portfolio Credit, which can benefit from the inefficiencies specific to this asset class, has posted a return at maturity of 6.2% at the end of June 2025 with an average rating of BBB- and net exposure to high-yield credit accounting for less than a quarter of net assets.
Figure 5: Evolution of the yield to maturity and the performance of Carmignac Portfolio Credit A EUR Acc since inception (31/07/2017)
A EUR Acc ISIN: LU1623762843. Performance is net of fees (excluding any entry fees charged by the distributor). Past performance is not necessarily indicative of future performance.
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. **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.
Articles that may interest you
Carmignac Portfolio Global Bond: Letter from the Fund Manager - Q2 2025
Carmignac Sécurité: Letter from the Fund Managers - Q2 2025
Carmignac P. Flexible Bond: Letter from the Fund Managers - Q2 2025
Marketing Communication. Please refer to the KID/prospectus of the fund before making any final investment decisions.
The decision to invest in the promoted fund should consider all its characteristics or objectives as described in its prospectus.
This communication is published by Carmignac Gestion S.A., a portfolio management company approved by the Autorité des Marchés Financiers (AMF) in France, and its Luxembourg subsidiary Carmignac Gestion Luxembourg, S.A., an investment fund management company approved by the Commission de Surveillance du Secteur Financier (CSSF). “Carmignac” is a registered trademark. “Investing in your Interest” is a slogan associated with the Carmignac trademark.
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. Access to the Funds may be subject to restrictions regarding certain persons or countries. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the material or availability of this material is prohibited. Persons in respect of whom such prohibitions apply must not access this material. Taxation depends on the situation of the individual. The Funds are not registered for retail distribution in Asia, in Japan, in North America, nor are they registered in South America. Carmignac Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Funds have not been registered under the US Securities Act of 1933. The Funds may not be offered or sold, directly or indirectly, for the benefit or on behalf of a «U.S. person», according to the definition of the US Regulation S and FATCA. Company. The risks, fees and ongoing charges are described in the KIID/KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Management Company may cease distribution in your country at any time. The Funds’ prospectus, KIDs, KIIDs, NAV and annual reports are available at www.carmignac.com, or upon request to the Management Company. Investors have access to a summary of their rights in French, English, German, Dutch, Spanish, Italian at section 5 of "regulatory information page" on the following link: https://www.carmignac.com/en_US/regulatory-information.
Carmignac Portfolio Flexible Bond is a sub-fund 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. The Management Company can cease promotion in your country anytime.
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.
Reference to certain securities and financial instruments is for illustrative purposes to highlight stocks that are or have been included in the portfolios of funds in the Carmignac range. This is not intended to promote direct investment in those instruments, nor does it constitute investment advice. The Management Company is not subject to prohibition on trading in these instruments prior to issuing any communication. The portfolios of Carmignac funds may change without previous notice.
The reference to a ranking or prize, is no guarantee of the future results of the UCITS or the manager.
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UK: This document was prepared by Carmignac Gestion, Carmignac Gestion Luxembourg or Carmignac UK Ltd and is being distributed in the UK by Carmignac Gestion Luxembourg.
Switzerland: the prospectus, KIDs and annual report are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland), S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Paris, succursale de Nyon/Suisse, Route de Signy 35, 1260 Nyon.
Belgium: These materials may also be obtained from Caceis Belgium S.A., the financial service provider, at the following address: avenue du port, 86c b320, B-1000 Brussels. In case of subscription in a French investment fund (fonds commun de placement or FCP), you must declare on tax form, each year, the share of the dividends (and interest, if applicable) received by the Fund. A detailed calculation can be performed at www.carmignac.be. This tool does not constitute tax advice and is intended to serve solely as a calculation aid. This does not exempt from having to perform the procedures and verifications incumbent upon a taxpayer. The results indicated are obtained using data that the taxpayer provide, and under no circumstances shall Carmignac be held responsible in the event of error or omission on your part. Pursuant to Article 19bis of the Belgian Income Tax Code (CIR92), in the case of subscription to a Fund that is subject to the Savings Taxation Directive, the investor will have to pay, upon redemption of his or her shares, a withholding tax of 30% on the income (in the form of interest, or capital gains or losses) derived from the return on assets invested in debt claims. Distributions are subject to withholding tax of 30% without income distinction. The net asset-values are available on the website www.fundinfo.com. Any complaint may be referred to complaints@carmignac.com or CARMIGNAC GESTION - Compliance and Internal Controls - 24 place Vendôme Paris France or on the website www.ombudsfin.be.
CARMIGNAC GESTION 24, place Vendôme - F-75001 Paris - Tél: (+33) 01 42 86 53 35 Investment management company approved by the AMF Public limited company with share capital of € 13,500,000 - RCS Paris B 349 501 676.
CARMIGNAC GESTION Luxembourg - City Link - 7, rue de la Chapelle - L-1325 Luxembourg - Tel: (+352) 46 70 60 1 Subsidiary of Carmignac Gestion - Investment fund management company approved by the CSSF Public limited company with share capital of € 23,000,000 - RCS Luxembourg B 67 549.