Carmignac Portfolio Patrimoine Europe: Letter from the Fund Managers

Published on
16 January 2024
Read time
6 minute(s) read
+2.60%Performance of the Fund in the quarter vs +5.54% for its reference indicator1 (A EUR Share class).
+2.07%Performance of the Fund in 2023 vs +9.54% for its reference indicator.
+5.67%Annualised Performance of the Fund over 5 years vs +5.06% for its reference indicator.

Over the quarter, Carmignac Portfolio Patrimoine Europe A EUR Acc posted a positive performance of +2.60% (A EUR share), below its reference indicator (+5.54%). The fund ended the year with a performance of +2.07%, outperforming its reference indicator1 (+9.54%).

Market environment

Just like a thrilling roller coaster ride, the stock market year has reached its exhilarating finale after giving investors a few heart-stopping moments. In the aftermath of a tumultuous 2022 marked by the war in Ukraine and surging energy prices, the markets entered 2023 with unwavering confidence, propelling numerous stock market indices to unprecedented heights before being grounded after the summer by soaring sovereign yields. However, as inflation subsided and Western economies demonstrated resilience, Central Banks optimism paved the way for a bright end to the year.

All in all, the majority of European assets experienced a positive performance, with only a few exceptions observed in the energy sector and specific commodities. The stock market was dominated by a narrow leadership, primarily driven by the US and its highly valued 'technology' giants. In Europe, there was more sectoral dispersion. While growth stocks had a slight edge, value stocks, including Italian and Spanish banks and French industrial stocks, held their ground. On the other hand, defensive sectors like Utilities, Staples, and Healthcare posted poor returns. European credit markets, both investment grade (IG) and high yield (HY), also performed well in 2023. At the same time, long yields fell considerably, with the German 10-yr yield easing by -85bp to 2% and the US 10-yr yield falling by -70bp to 3.88%, benefiting from expectations of monetary easing in 2024, preventing a third consecutive year of declines.

How did we fare in this context ?

In 2023, the fund delivered a positive absolute performance, but below its reference indicator. Overall for the year, our cautious exposure to risky assets and modified duration tactical management explain the Fund's relative underperformance.

Despite a positive start to the year for our quality/growth equities, the fund suffered from its bond component. Specifically, the increase in rates in February (due to our long positions in UK and non-core debt such as Greece and Spain) and the high volatility of short rates in March following the banking crisis had a detrimental effect on the fund. Subsequently, the Fund’s positioning reflected a less optimistic economic outlook, with limited exposure to equities and positive modified duration. Although this scenario was slowly unfolding in Europe, investors focused more on the resilience of US growth and this positioning didn’t pay off.

After the summer, we kept a positioning reflecting a less optimistic economic outlook due to the growing effects of monetary and fiscal tightening on the real economy and especially a long duration. Nevertheless, the stickiness of inflation led European central banks to keep a hawkish tone leading to a negative dynamic on the rates front. In such a context our exposure to sovereign bonds and to equity proved a drag. On our equity bucket our performance was also affected by some idiosyncratic stories such as Lonza or Adyen. However, from November this positioning finally paid off benefiting both the equity and bond components of the portfolio. Our corporate bond convictions were also rewarded in good conditions for risky assets. The only blot on the copybook was our risky asset hedging in both equity and credit. These instruments explain the Fund’s lag behind its reference indicator over the end of year rally. In the previous two months, we had taken a cautious approach to these asset classes and introduced hedging with derivatives (options and futures), which had a negative impact in a generally bullish environment.

Outlook

After a particularly favorable end to the year for both equity and fixed income markets, we are approaching 2024 with a measured positioning in terms of both interest-rate risk and equity risk. Indeed, while the positive correlation between equity and bond prices has been favorable in recent months, expectations seem particularly optimistic on the disinflation front, as well as in terms of future rate cuts and corporate earnings expectations. The main vulnerability lies in the contradiction between an aggressive rate-cutting cycle in the US this spring and a benign economic growth trajectory. Given this complex landscape, it is difficult for us to form a predetermined view on the market's overall expected performance for 2024.

Although inflation has fallen sharply in recent months, coming close to the central bankers' target, it remains under upward pressure from secular trends (military conflicts, ageing populations, energy transition, relocation of production chains) and cyclical trends (the US economy is resisting the interest-rate shock well). The first part of the year is likely to be characterized by the possibility of the US economy not landing, while the European economy oscillates between stagnation and recession.

In our portfolio, the current uncertainties highlight the importance of actively managing both interest rate risk and equity style risk. In our equity portfolio, we aim to diversify our holdings in the short term by incorporating more cyclical sectors alongside our long-term quality/growth focus. We are therefore trying to anticipate a no-landing scenario by tactically investing in Stoxx 600 Bank and Stoxx 600 Basic Resources futures. Additionally, we have implemented options as a form of protection against alternative macro scenarios. These options are currently priced attractively due to the low volatility in the markets, making them a valuable addition to our portfolio construction. This is particularly advantageous as the carry of our credit portfolio enables us to offset the cost of their premium. About credit, we also have some tactical protection to guard against any widening of credit spreads following the sharp tightening of index valuations. Regarding sovereign bonds, we believe that the market has already priced in the possibility of central bankers implementing rate easing measures in 2024. As a result, we have decided to adopt an active duration management approach, particularly on long rates, which are likely to suffer from high issuance volumes. Overall, our strategy takes into account the uncertainties in the market and aims to optimize our risk exposure while capitalizing on potential opportunities for growth and diversification.

1Reference Indicator: 40% STOXX Europe 600 (Reinvested Net Dividends) + 40% ICE BofA All Maturity All Euro Government + 20% ESTER capitalized. Quarterly Rebalanced. Until 31/12/2021, the reference indicator was 50% STOXX Europe 600, 50% BofA Merrill Lynch All Maturity All Euro Government Index. The performances are presented using the chaining method.

Carmignac Portfolio Patrimoine Europe

An all-weather European FundDiscover the fund page

Carmignac Portfolio Patrimoine Europe A EUR Acc

ISIN: LU1744628287
Recommended minimum investment horizon
3 years
Risk indicator*
3/7
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 https://eur-lex.europa.eu/eli/reg/2019/2088/oj.

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.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.Credit: Credit risk is the risk that the issuer may default.
The Fund presents a risk of loss of capital.

Fees

ISIN: LU1744628287
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
1,80% 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
0,67% 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.

Annualised Performance

ISIN: LU1744628287
Carmignac Portfolio Patrimoine Europe-4.818.713.99.5-12.72.1
Reference Indicator-4.816.42.410.2-11.09.5
Carmignac Portfolio Patrimoine Europe- 0.7 %+ 5.6 %+ 4.4 %
Reference Indicator+ 2.4 %+ 4.1 %+ 3.7 %

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

Related articles

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.

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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.

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