Carmignac Portfolio Human Xperience: Letter from the Fund Manager - Q3 2025

Over the third quarter, Carmignac Portfolio Human Xperience F EUR Acc recorded a performance of +3.22%, underperforming the MSCI All Country World, which posted a gain of +7.52%.

In the third quarter, equity markets surged, supported by the Federal Reserve’s monetary policy easing, reduced trade tensions following agreements between the US and Europe/Japan, the passage of the One Big Beautiful Bill Act in the United States, and a broadly solid corporate earnings season. Investors largely chose to overlook signs of a moderate economic slowdown in the United States and Europe, persistent inflation above central bank targets, widening public deficits, and ongoing geopolitical tensions.

US markets continued to be buoyed by the ongoing enthusiasm around artificial intelligence (AI). The momentum was sustained by significant investments from hyperscalers, robust corporate earnings, and a surge in deals and partnerships across the infrastructure and cloud computing sectors.

Emerging markets outperformed, driven by strong performance in Asia. Chinese indices rebounded sharply after a prolonged period of underperformance, supported by new stimulus measures from Beijing, and a renewed appetite for Chinese tech. Korean equities also benefited from growing investor interest in AI and computing infrastructure, amid announcements of structural reforms in the country—particularly in corporate governance.

In contrast, European markets underperformed over the period, weighed down by a weaker-than-expected macroeconomic environment, the appreciation of the euro, tariffs, and heightened political uncertainty, notably in France.

During the third quarter of 2025, the Carmignac Portfolio Human Xperience delivered a positive return supported by strong gains in leading digital and consumer experience names. Key contributors included Alphabet and Tencent, which benefited from improved sentiment toward technology and digital engagement platforms. Sector performance was led by consumer and communication services, while defensives lagged slightly amid expectations of lower interest rates. Overall, the portfolio’s emphasis on companies enhancing customer and employee experiences continued to drive resilient performance as macro conditions turned more supportive.

During the period, several software and IT service providers — Accenture, Intuit, Salesforce, Capgemini, and ServiceNow came under pressure as investors rotated away from “AI-adjacent” service firms toward the direct beneficiaries of AI infrastructure and semiconductor demand. Markets perceived these names as potential AI losers or disrupted incumbents, with concerns that generative AI could compress consulting margins, automate core functions, or slow enterprise software spending cycles. However, over the long term, these companies remain structurally well positioned to benefit from AI adoption as trusted partners in digital transformation. Their deep enterprise relationships, mission-critical software platforms, and strong balance sheets enable them to integrate, deploy, and scale AI solutions across industries, turning disruption into a growth opportunity. While near-term sentiment has been weak, these firms are essential enablers of AI implementation rather than its casualties, offering defensive quality and long-duration growth potential once the investment cycle normalizes.

During the third quarter, key AI beneficiaries — Alphabet, Tencent, Samsung Electronics, Lenovo, and NVIDIA delivered strong market performance as enthusiasm around AI adoption and infrastructure spending accelerated. These companies represent the core of the AI value chain, spanning from semiconductor design and manufacturing (NVIDIA, Samsung) to hardware integration (Lenovo) and AI-driven platforms and digital ecosystems (Alphabet, Tencent). While valuations have expanded meaningfully, their long-term appeal lies in sustained competitive advantages with deep R&D capabilities, global scale, and integrated ecosystems that allow them to shape the next phase of AI deployment across industries. Together, they remain key structural winners as AI continues to transform productivity, connectivity, and digital consumption globally.

The Carmignac Human Xperience fund aims to achieve long-term capital growth by investing in companies that prioritize human capital and stakeholder engagement. The fund focuses on businesses that demonstrate strong practices in areas such as employee well-being, customer satisfaction, and community involvement. By investing in companies that excel in these areas, the fund seeks to generate sustainable financial returns while also promoting positive social impact. The strategy is based on the belief that companies with strong human-centric practices are better positioned for long-term success and resilience.

At the end of the quarter, we remained overweight consumer sectors with Staples at 17.3% and consumer discretionary at 17.5%. Within the portfolio, the consumer and consumption-oriented names have lagged in recent quarters but now appear well positioned to benefit from an improving macro backdrop as interest rates begin to decline. Key exposures include L’Oréal, Unilever, adidas, Costco, and Colgate-Palmolive, which stand to gain from a recovery in discretionary spending and resilient household demand. Amazon also offers significant leverage to consumer trends through its dominant e-commerce platform and expanding logistics network. In the financial space, Visa, Mastercard, and JPMorgan Chase provide indirect exposure to consumption growth via higher transaction volumes and credit activity. Meanwhile, Sony and Tencent add further breadth through digital entertainment and gaming, both sensitive to consumer sentiment. Overall, this group is poised to reaccelerate as real incomes improve and monetary policy turns more supportive, offering cyclical upside after a period of relative underperformance.

Over the quarter, We re-initiated a position in Eli Lilly during the third quarter, having exited in 2024, as we see a compelling re-entry point supported by strong earnings momentum and multiple upcoming catalysts. The company continues to deliver consistent revenue and EPS beats, underpinned by robust operating leverage from its market-leading GLP-1 portfolio. While results for its oral GLP-1 candidate orforglipron were mixed, we view that its global scalability and patient-preference advantages enhance long-term strategic value. With mid-teens EPS growth expected over the medium term, the current valuation — a forward P/E near 20x, appears well supported. In addition, pipeline milestones such as data readouts for retatrutide, Mounjaro’s cardiovascular outcomes trial, and Alzheimer’s studies present material upside potential. Despite isolated competitive headwinds, Lilly’s diversified innovation engine and disciplined execution position the company as one of the most resilient and structurally attractive healthcare names, making this an opportune moment to re-enter the stock.

Regarding the AI theme, several holdings provide meaningful exposure to the accelerating Technology and AI theme. Core beneficiaries include NVIDIA, Microsoft, Alphabet, Apple, and TSMC, which are at the forefront of AI innovation through leadership in semiconductor design, cloud infrastructure, software integration, and enabling hardware. Tencent and Sony also contribute to this theme through their use of AI in gaming, entertainment, and digital ecosystems, while Mastercard leverages AI to enhance its data analytics and fraud prevention capabilities. In contrast, L’Oréal and Costco have more limited direct exposure, with AI primarily used to improve operational efficiency and customer engagement rather than drive core growth.

Across the fund, the third quarter highlighted a shared focus on enhancing customer and employee experience amid a shifting economic environment. Companies such as Home Depot, Marriott, and Hilton continued investing in front-line staff training and digital tools to improve service consistency and personalization, recognizing that employee engagement directly drives guest satisfaction. SAP, ServiceNow, Salesforce, and Accenture emphasized the integration of AI and workflow automation to improve both customer support efficiency and employee productivity, positioning experience management as a competitive differentiator. Meanwhile, Procter & Gamble, Nestlé, and Beiersdorf underscored brand trust and product quality as key to retaining customer loyalty, though some, like P&G, faced scrutiny over restructuring plans and workforce morale. Industrial and technology names such as Samsung, Lenovo, and Michelin focused on user experience through product innovation and more responsive after-sales service, while also advancing employee well-being and skills development programs to sustain operational excellence. Overall, the quarter underscored that companies linking customer satisfaction and employee empowerment through digital investment, culture, and training are best positioned to navigate slower growth and rising service expectations.

In our view, customer loyalty has become an increasingly powerful competitive advantage in the digital age, as highlighted in our recent insights. Well-designed loyalty programs not only drive repeat purchases but also deepen emotional engagement and provide valuable behavioural data that enhance personalization and retention. As digital platforms and AI enable more targeted and dynamic customer experiences, companies with robust loyalty ecosystems are better positioned to sustain growth and margin resilience, even in a more volatile consumer environment. This aligns closely with our Human Xperience philosophy, which emphasises investing in firms that excel in strengthening long-term customer relationships.