Carmignac

Carmignac Portfolio Emerging Patrimoine: Letter from the Fund Managers

  • Author(s)
    Xavier Hovasse,  Joseph Mouawad
  • Published
  • Length
    6 minute(s) read
  • +5.6%
    Net return

    of Carmignac Portfolio Emerging Patrimoine F EUR Acc over Q1 20231

  • 1st
    quartile

    Carmignac P. Emerging Patrimoine F EUR Acc is ranked 1st quartile within its Morningstar category (Global EM Allocation) for its return over 1, 3 and 5 years.

  • +6.8%
    Annualized return

    of the Fund over 3 years1

Carmignac Portfolio Emerging Patrimoine (F EUR Acc) gained +5.6% over the first quarter of 2023, while its reference indicator2 was up +2.3%.

Market environment

During the first quarter of 2023 we have continued to see high levels of volatility across markets. While we saw the market pricing the end of rate hikes in the US in January the NFP (Non-Farm Payrolls) data published on the 3rd of February repriced the hikes until we started to see bank stress in the US and Europe.

Carmignac

In this environment the EM sovereign credits performed well in January and remained stable in February, but the sharp rally in rates of March did not translate to a rally in the credit, especially the high yield (HY). The Local rates have been the best behaved in the EM universe in this period of volatility. Latam rates continued to remain stable despite higher rates in the US while the CE3 region enjoyed a strong rally over the quarter. Indeed, in EM inflation pressures have started to ease during 2022 thanks to the restrictive actions taken early by central banks. Importantly we have also seen towards the end of the quarter the drop in Global food prices which translates to some domestic food inflation.

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In the currencies space, EM currencies performed well for most of the period versus the USD and EUR, with a significant amount of volatility around the sharp repricing of rates in February as a number of heavily positioned currencies got liquidated.

Performance review

In this context from its positioning the fund was able to make most of its returns from the EM Local Rates as well as the FX. In particular the fund maintained an exposure to CE3 Rates with the Czech Republic and Hungary, which saw significant rallies during the period (January and March). In other regions Korean Rates benefitted from the rally in March. For the Latam region we benefitted from the Brazilian rates, but for the MXN Banxico caught the market by surprise with a 50bps hike impacting the fund performance.

The FX was the second source of performance largely thanks to positions in Latam, a region with some of the highest real rates in the world and in particular for BRL, CLP and MXN. EMEA was the second region of performance with the HUF continuing its stabilization vs the EUR and CZK rallying from the central bank’s policy and improving external balances.

On the Equity side, we have kept the exposure of the fund low, with tactical increases in exposure during rallies. We have maintained the bias of the fund towards technological companies, especially in China and South Korea.

Outlook for the next months

Going forward we think that given the stress that we have seen on the financial system it is unlikely that we can continue to reprice the terminal rates higher. Furthermore, we expect that the impact of the tightening that we have seen is starting to impact economies, with property prices correcting in a number of countries, financial system stress, etc…

In this context we think that EM local rates are going to continue to play an important role in the fund, in particular rates in Brazil should be able to price further cuts as the new fiscal framework is published and the political noise drops. Also, Mexican rates are interesting as a proxy to US rates but starting from a tighter stance and a slower economy. Finally, in CE3 we continue to like Czech rates as well as Hungarian rates.

In FX, while we like to be invested in high carry currencies such as the CZK or the BRL, we are going to remain flexible in the currency allocation. In particular if we start seeing rate cuts sooner than expected, EM FX will be under pressure vs the USD or the EUR. Regarding our exposure to External debt and given the lack of correction in the global risk despite the increased stress we remain cautious and focused on idiosyncratic stories while maintaining a relatively high level of protection via CDS.

As for the Equities, just like for Credit, we are going to remain cautious for the overall exposure of the fund. Our single stock composition remains biased towards Asia which continues to offer attractive valuations.

1Carmignac Portfolio Emergents F EUR Acc (ISIN : LU0992626480). Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time.). Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations. Performances are net of fees (excluding possible entrance fees charged by the distributor). Performance in euros as of 31/03/2023
2For the share class Carmignac Portfolio Emerging Patrimoine F EUR Acc, ISIN LU0992631647 Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). Until 31/12/2021, the reference indicator was 50% MSCI Emerging Markets index, 50% JP Morgan GBI - Emerging Markets Global Diversified Index. The performances are presented using the chaining method.

Sources: Carmignac, Bloomberg, EM Advisors Group, 31/03/2023

Carmignac Portfolio Emerging Patrimoine

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Carmignac Portfolio Emerging Patrimoine F EUR Acc

ISIN: LU0992631647

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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.

INTEREST RATE: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.

CREDIT: Credit risk is the risk that the issuer may default.

EMERGING MARKETS: Operating conditions and supervision in "emerging" markets may deviate from the standards prevailing on the large international exchanges and have an impact on prices of listed instruments in which the Fund may invest.

The Fund presents a risk of loss of capital.

Carmignac Portfolio Emerging Patrimoine F EUR Acc

ISIN: LU0992631647
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (YTD)
?
Year to date
Carmignac Portfolio Emerging Patrimoine F EUR Acc +5.95 % +0.83 % +10.46 % +8.00 % -13.80 % +19.17 % +21.06 % -4.61 % -9.00 % +8.18 % +0.46 %
Reference Indicator +9.38 % -5.09 % +13.97 % +10.58 % -5.84 % +18.23 % +1.51 % +1.61 % -8.39 % +6.65 % +0.90 %

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3 Years 5 Years 10 Years
Carmignac Portfolio Emerging Patrimoine F EUR Acc -2.07 % +5.11 % +4.41 %
Reference Indicator -0.23 % +2.34 % +4.25 %

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Source : Carmignac at 29/02/2024

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 : 1,16% 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 : 0,71% 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.
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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.

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.

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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.

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