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Carmignac Investissement : Letter from the Fund Manager

  • Author(s)
    David Older
  • Published
  • Length
    5 minute(s) read

Carmignac Investissement lost -3.48%* in the third quarter of 2021 vs +1.25% for the reference indicator1. Since David Older’s took over the management2, the Fund is up 78.17% vs 61.31% for its indicator.

  • -3.48%
    Carmignac Investissement’s performance

    in the 3rd quarter of 2021 for the A EUR Share class.

  • +1.25%
    Reference indicator’s performance

    in the 3rd quarter of 2021 for MSCI World.

  • +78.17%
    Since David Older took over the management

    vs 61.31% for the reference indicator.

Quarterly Performance Review

Equity markets recorded mixed performance over the quarter. In developed countries, the positive momentum driven by robust Covid-related fiscal and monetary stimulus and strong earnings growth stopped in September. Rising inflationary pressures and the perspective of a slowing pace of growth post-Covid have weighed on investors’ enthusiasm. In the emerging world, the Chinese government’s announcements of stiffer regulation of several sectors led to a market selloff. In this context, sector and geographic performances differed, with developed market financials, materials and energy leading the move.

While they clearly drove our outperformance in 2020, our Chinese positions led us to underperform this quarter and in 2021 to date. We believe we have built an expertise in finding secular growth companies over the years and had significant exposure to the region, which overflows with high growth opportunities. However, news flow over recent months has negatively impacted investor sentiment. The Chinese government has announced new initiatives and regulations with the aim of fostering “social prosperity” in the broad sense. Some examples would be probing the monopolistic behavior of the biggest Internet platforms, protecting consumer data security, and ensuring fair wages/benefits for temporary workers engaged in e-commerce and food delivery or ride sharing. While the initiatives appear rational, the market sold off on the lack of clarity as to how the changes would affect business models. On the top of these regulatory measures, a potential default of Evergrande, a large Chinese property developer, raised fears about potential contagion to other parts of the economy. All of this considerably weighed on Chinese equities over the quarter.

Despite weakness in our Chinese exposure, other high convictions positions recorded good performance, like the cloud-based software company Salesforce, now the biggest position in our book. The company is emblematic of the secular growth companies that we look for. It has exposure to multiple aspects of the digital transformation that we are seeing across geographies and industries today, with a large total addressable market close to $175Bn as well as historically strong and sustainable earnings3. Cybersecurity company SentinelOne also contributed nicely. Organizations have faced new security challenges as the cloud and remote working have become a must. Many cybersecurity values have skyrocketed as a result, and the demand for next-generation security software in a new digital age is higher than ever. Global spending on cybersecurity is expected to exceed $120 billion by year-end and continues to be a high-growth sector in the future. We have sold our position in SentinelOne after very strong returns but bought US cybersecurity company Palo Alto Networks to retain exposure to this important thematic. Some of our top positions like Microsoft and Alphabet also recorded a positive performance.

Outlook

Our investment process revolves around identifying sustainable companies underpinned by powerful secular growth trends in order to invest in companies that can perform in different economic conditions. This allows us to build strong convictions that can outperform over the long term, and to avoid secularly challenged businesses that fail to offer long term attractive and visible growth.

As long-term investors, we see the sell-off in Chinese equities as creating good opportunities and attractive entry points. In fact, clearer regulation for big companies should be long term constructive for Chinese markets as it provides investors with more visibility on business models and improves corporate governance standards. However, selectivity prevails. We mostly focus on segments where a negative scenario has been priced in that we feel is not justified, and those where we see minimal government risk or outright government support towards the creation of Chinese champions – for example in drug development, technology or renewable energy.

For the coming months, we should expect weaker economic growth momentum due to lesser fiscal impulse and tightening monetary policies. This should result in headwinds to the earnings growth of the overall market - which we expect to favor companies benefiting from more visibility and structural themes. However, as inflationary pressures are rising, stock selection could become again key to make a difference even within the growth trend.

As a result, we maintain a liquid portfolio, diversified in terms of geography, sectors and themes. Our core thematics revolve around 1) the New Consumer (33%), with ecommerce players like China’s JD.com and Amazon, sportswear brands Lululemon and Puma, and luxury company Hermes 2) the Digital Economy (30%), with fintech names like Square and Affirm, and software companies Salesforce and Kingsoft Cloud, and transport and meal delivery platform Uber 3) Advanced Healthcare (17%), with names like China’s Wuxi Biologics and the American health provider Anthem, and 4) Climate change (6%) with Korean battery producer LG Chem and US residential solar provider SunRun.

The pandemic has served as an accelerator of existing trends. Online shopping, food delivery, digital payments, flexible work technology, and cloud-based infrastructure are not new, but the COVID crisis has vastly accelerated their adoption. Companies positioned to ride these trends are not only disrupting incumbents but extending their leads on their peers. These are the companies we are investing in.

Carmignac

Source: Carmignac, 30/09/2021. Others: 6.3%. Portfolio composition can change over time and without prior notice

(1) Reference Indicator: MSCI ACWI (USD) (net dividends reinvested).
(2) 31/12/2018
(3) Source: Bloomberg

Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged. Performances are net of fees (excluding possible entrance fees charged by the distributor). As of 01/01/2013, the reference indicators for the shares are calculated net dividends reinvested. Source: Carmignac, 30/09/2021 Risk Scale from the KIID (Key Investor Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. The reference to a ranking or prize, is no guarantee of the future results of the UCIS or the manager.

Carmignac Investissement

Investing sustainably in high-growth segments around the world

Discover the fund page

Carmignac Investissement A EUR Acc

ISIN: FR0010148981

Recommended minimum investment horizon

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1 2 3 4 5 6 7
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.

CURRENCY: Currency risk is linked to exposure to a currency other than the Fund’s valuation currency, either through direct investment or the use of forward financial instruments.

DISCRETIONARY MANAGEMENT: Anticipations of financial market changes made by the Management Company have a direct effect on the Fund's performance, which depends on the stocks selected.

The Fund presents a risk of loss of capital.

Carmignac Investissement A EUR Acc

ISIN: FR0010148981
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (YTD)
?
Year to date
Carmignac Investissement A EUR Acc +10.39 % +1.29 % +2.13 % +4.76 % -14.17 % +24.75 % +33.65 % +3.97 % -18.33 % +18.92 % +13.54 %
Reference Indicator +18.61 % +8.76 % +11.09 % +8.89 % -4.85 % +28.93 % +6.65 % +27.54 % -13.01 % +18.06 % +8.09 %

Scroll right to see full table

3 Years 5 Years 10 Years
Carmignac Investissement A EUR Acc +2.02 % +9.93 % +7.48 %
Reference Indicator +8.46 % +10.47 % +11.03 %

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Source: Carmignac at 30/04/2024

Entry costs : 4,00% 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 : 1,50% 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 once performance since the start of the year exceeds that of the reference indicator and if no past underperformance still needs to be offset. 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 : 1,09% 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.

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.

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. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Carmignac, its officers, employees or agents.

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 UCIS or the manager.

Morningstar Rating™ : © Morningstar, Inc. All Rights Reserved. The information contained herein: is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

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. The risks, fees and ongoing charges are described in the KID (Key Information Document). The KID must be made available to the subscriber prior to subscription. The subscriber must read the KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Funds present a risk of loss of capital.

The Funds’ prospectus, KIDs, NAVs and annual reports are available at www.carmignac.com, 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 France, Luxembourg, Sweden: The risks, fees and ongoing charges are described in the KID (Key Information Document). The KID must be made available to the subscriber prior to subscription. The subscriber must read the KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Funds present a risk of loss of capital. The Funds’ prospectus, KIDs, NAV and annual reports are available at www.carmignac.com, or upon request to the Management.

  • In the United Kingdom: the Funds’ respective prospectuses, KIIDs and annual reports are available at www.carmignac.co.uk, or upon request to the Management Company, or for the French Funds, at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R. 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.

  • In 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, Montrouge, Nyon Branch / Switzerland, Route de Signy 35, 1260 Nyon.

The Management Company can cease promotion in your country anytime. Investors have access to a summary of their rights in English on the following links: UK ; Switzerland ; France ; Luxembourg ; Sweden.