Carmignac P. Flexible Bond: Letter from the Fund Managers

Published on
10 April 2024
Read time
3 minute(s) read
+2.09%Carmignac P. Flexible Bond’s performance in the 1st quarter of 2024 for the A EUR Share class.
-0.36%Reference indicator’s performance in the 1st quarter of 2024 for ICE BofA ML Euro Broad index (EUR).
+3.93%Relative annualized performance of the Fund for A EUR shareclass versus ICE BofA ML Euro Broad index (EUR) over 3 years period.

In the first quarter of 2024, Carmignac Portfolio Flexible Bond posted a positive performance of +2.09% for the A shareclass, well ahead from its benchmark1(-0.36% for the ICE BofA ML Euro Broad index (EUR)).

The bond markets today

The year-end euphoria over sovereign rates was short-lived. In the first few weeks of January, the resilience of economic activity, especially in the United States where growth continues to outpace potential, the surge in risky assets driven by the acceleration of the artificial intelligence theme, and record bond issuance to finance public deficits that are only gradually being normalised, brought global rates back to levels close to those recorded on average for 2023. But it was above all the hopes of disinflation, raised by the strong progress made in the second half of 2023, that were clearly dashed by the upward surprises in consumer price indices in January and February in the United States, and to a lesser extent in Europe. Against this disinflationary backdrop, the markets, which were anticipating more than six rate cuts by the US Federal Reserve and the European Central Bank in 2024, are now incorporating only 2.5 and 3.5 cuts respectively. The German 2-year rate jumped from 2.40% to 2.85% over the quarter, and the German 10-year rate from 2.02% to 2.30%. Similarly, the US 10-year yield rose from 3.88% to 4.20%. Against this backdrop, there were no major surprises at central bank meetings in the first quarter, with the exception of the Bank of Japan, which put an end to its negative interest rate policy by raising its key rate from -0.1% to a range of 0%-0.1%, at a time when inflation seems to be returning after 3 decades and the currency is in sharp decline. On the other hand, the context was favourable for risky assets thanks to the resilience of economic activity in the United States and Europe. Moreover, market volatility has fallen sharply, particularly on interest rates, thanks to central banks explicitly indicating that they are at the peak of their monetary tightening. As a result, high-yield credit spreads in Europe are now below 3%, a new low since the invasion of Ukraine, after having tightened against German bonds by more than 25 basis points over the quarter.

Asset allocation

In this unfavourable environment for the fixed-income markets, our strategy significantly outperformed its benchmark by relying on the positive contribution of our carry and inflation strategies, while mitigating the negative contribution of the fixed-income engine thanks to our active duration management. Our allocation to credit sub-segments such as structured credit, financial subordinated debt and high-yield credit worked well in an environment of credit margin compression. Nevertheless, we have continued to strengthen our protection on credit indices in an environment of low volatility and expensive valuation. In addition, we increased our exposure to breakeven inflation in the US and Europe, in line with the robust growth figures. Finally, after having been a key performance driver in the last quarter of 2023, we continued to trim our exposure to core rates, moving from a sensitivity of 2.6 in December to 1.4 at the end of the period. This came mainly from the portfolio's corporate bonds and inflation-linked bonds, tempering the impact of rising rates on the portfolio.


The resilience of the main developed economies is paradoxically good news, but it is also a source of fragility for the markets, as this robustness is based purely on the new paradigm of government budget deficits. This fiscal stimulus is generating distortions that are beginning to weigh on fixed-income assets, as these fiscal policies contradict the monetary policies pursued by the main central banks. This prospect of the economy not landing also makes the scenario of a return to the inflation target illusory, as the robustness of the economic data continues to surprise investors on the upside. In addition, the recent surge in commodity prices, which were previously the main contributors to disinflation, are now expected to weigh on future producer and consumer price releases. These economic prospects argue in favour of maintaining a low interest-rate sensitivity within the portfolio, with a preference for the short end of the yield curves. We are maintaining a negative sensitivity to long maturities, where over-supply is likely to come up against weaker demand at a time when the main central banks are reducing the size of their balance sheets, as well as a short position on Japanese sovereign yields as the Bank of Japan began its rate hike cycle in March. On the credit front, we are maintaining a high gross exposure to sub-segments with high carry, such as financial subordinated debt and structured credit, while reducing our net exposure through cheap protection to prevent against exogenous shocks. Finally, we are maintaining a high exposure to inflation-indexed strategies, which should benefit from the upward recalibration of inflation expectations and which also provide an attractive hedge against a possible rise in geopolitical risk.

Source: Carmignac as at 31/03/2024. A EUR Acc shareclass 1ICE BofA Euro Broad Market Index (coupons reinvested). On 30/09/2019 the composition of the reference indicator changed: the ICE BofA ML Euro Broad Market Index coupons reinvested replaces the EONCAPL7. Performances are presented using the chaining method. On 10/03/2021 the Fund’s name was changed from Carmignac Portfolio Unconstrained Euro Fixed Income to Carmignac Portfolio Flexible Bond. 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 applicable entrance fee acquired to the distributor).

Carmignac Portfolio Flexible Bond

A flexible solution aiming to capture bond opportunities globallyDiscover the fund page

Carmignac Portfolio Flexible Bond A EUR Acc

ISIN: LU0336084032
Recommended minimum investment horizon
3 years
Risk indicator*
SFDR - Fund Classification**
Article 8

*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

Main risks of the fund

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.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.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.
The Fund presents a risk of loss of capital.


ISIN: LU0336084032
Entry costs
1,00% 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
0,38% 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.


ISIN: LU0336084032
Carmignac Portfolio Flexible Bond2.0-
Reference Indicator0.1-0.1-0.3-0.4-0.4-2.54.0-2.8-16.96.8
Carmignac Portfolio Flexible Bond- 0.4 %+ 1.8 %+ 1.1 %
Reference Indicator- 4.5 %- 2.8 %- 1.6 %

Source: Carmignac at 28 Jun 2024.
​Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).

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