Carmignac

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The credit market today

  • The pandemic and war in Ukraine have ushered in a new economic order

    Risk-free rates and credit spreads rose in tandem in 2022, resulting in record losses in the credit market but also, and even more significantly, a spectacular rise in the yields on credit instruments.

    The end of the pandemic and the war in Ukraine have brought inflation back to the developed world and forced central banks to place a cost back on capital.

    This unprecedented series of events has had direct repercussions on the credit market. Inflation has suppressed demand among not just consumers but also businesses, many of which may have to restructure their production chains, rethink their business models, and adjust their margins.

    In this new economic order, we can expect to see favourable conditions for fixed income and levels of carry in the coming years that we haven’t experienced in over a decade.

  • Default rates to rise in the credit markets

    Now that the main central banks are scaling back their liquidity injections, interest rates and credit spreads should settle at structurally higher levels.

    This marked increase in the cost of capital will likely push default rates back up to normal and bring back significant opportunities for generating alpha.

    Default rates had been held artificially low for years, prompting too many investors to allocate capital to inefficient projects and companies, meaning we’re now seeing attractive yields in the credit space.

    The expected rise in default rates hasn’t yet materialised, but credit spreads already price in an extremely pessimistic outlook for defaults over the next few years. As a result, the market is poised to absorb a substantial rise in defaults while still offering attractive carry.

  • Appealing “complexity premiums” are back on the cards

    Higher default rates will naturally fuel the amount of perceived risk in the credit market. And the more fearful investors are of credit, the more opportunities there will be for asset managers who are driven by the fundamentals.

    Investing successfully in the credit market means finding a large number of issuers whose risks are overpriced. And unsurprisingly, investors tend to overprice risks when the market as a whole is experiencing a high number of defaults.

    It follows that today’s credit market not only offers attractive valuations, but also harbours a wealth of idiosyncratic opportunities enabling us to generate returns from both alpha and beta.

Our main convictions

Our investments are concentrated mainly in investment themes that stand to benefit from the inflationary environment and higher interest rates. These themes include:

  • Commodities sector: Energy producers and the associated services firms are getting a direct boost from the rising energy prices – a trend compounded by years of underinvestment in this sector. What’s more, many issuers offer a combination of solid (and improving) fundamentals, limited interest-rate sensitivity, and attractive credit spreads.

  • Financials: Banks’ and insurers’ profit margins will likely be supported going forward by steepening sovereign yield curves, higher risk premiums, and the end of negative interest rates on deposits.

  • Distressed debt: We’ve invested in a handful of special restructuring situations, which we view as potential opportunities with rewarding “complexity premiums”.

  • Collateralized loan obligations (CLOs): Because these are floating-rate instruments, they can mitigate the negative effects of higher inflation, interest-rate volatility, and higher default rates while offering attractive returns.

Our flagship strategy

Our credit team, established in 2015, is headed by Pierre Verlé and composed of experienced asset managers who employ a fundamentals-based approach. Thanks to their sound technical skills and rigorous investment process, they have a track record of delivering solid returns under a variety of market conditions. They currently manage a portfolio of over €10.9 billion1 in credit-market investments (including IG, HY, DM, EM and CLOs).

Our credit team’s strong performance has earned numerous industry accolades. The team has an AA rating along with a Gold distinction from Citywire in the Bonds–Euro Corporates category, and is a winner of the EuroHedge Award in the Macro, Fixed Income and Relative Value category.

  • Carmignac Portfolio Credit

    • Strategy AuM: €1067M (30/01/2023)

    • Launch Date: 31/07/2017

    Main Characteristics:

    • FX Hedged
    • DM & EM Corporate Credit
    • Max. CLOs exposure: 20%
    • Max. HY exposure: 50%
    • Credit derivatives up to 30%

1Source: Carmignac. ¹ Across all Carmignac portfolios, as of 30/01/2023. The reference to a ranking or an award is not a guarantee of the future results of the fund or the manager. Morningstar Direct © 2023 Morningstar, Inc. all rights reserved. EUR Flexible Bond Class. EUROHEDGE AWARD 2019. Winner in the “macro, fixed income & relative value” category February 2020. Source and copyright : Citywire. Pierre VERLE and Alexandre DENEUVILLE are rated AA by Citywire for their risk-adjusted performance over a rolling three-year period for all the funds they manage as of October 31, 2022. Carmignac is rated “GOLD” in the “Bonds – Euro Corporates” category by Citywire for its rolling risk-adjusted performance, across the sector, over the period 31/12/2015 – 31/12/2022. Citywire fund manager ratings and Citywire rankings are the property of Citywire Financial Publishers Ltd (“Citywire”) and © Citywire 2023.

Carmignac Portfolio Credit

Access the entire credit spectrum for maximum flexibility

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Carmignac Portfolio Credit A EUR Acc

ISIN: LU1623762843

Recommended minimum investment horizon

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Main risks of the Fund

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

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

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

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 Portfolio Credit A EUR Acc

ISIN: LU1623762843
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (YTD)
?
Year to date
Carmignac Portfolio Credit A EUR Acc - - - +1.79 % +1.69 % +20.93 % +10.39 % +2.96 % -13.01 % +10.58 % +7.74 %
Reference Indicator - - - +1.13 % -1.74 % +7.50 % +2.80 % +0.06 % -13.31 % +9.00 % +5.82 %

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3 Years 5 Years 10 Years
Carmignac Portfolio Credit A EUR Acc +1.27 % +3.45 % -
Reference Indicator +0.03 % +0.61 % -

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Source: Carmignac at 29/11/2024

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 : 0,85% 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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  • 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.

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