+2.38%Carmignac P. Global Bond (A Euro Acc)
performance during the 1st quarter of 2023
+1.26%Reference indicator’s performance
in the 1st quarter of 2023 for JP Morgan GBI Global (EUR)
+1.12%Outperformance of the fund
during the year versus its reference indicator.
Carmignac Portfolio Global Bond was up by +2.38% (class A shares) in the first quarter of 2023, and it outperformed its reference indicator (JP Morgan Global Government Bond Index (EUR)), which delivered +1.26%.
The bond markets today
Bond markets were very volatile in Q1 2023. We could divide the quarter into three different phases:
January was dominated by the soft-landing story with encouraging disinflation numbers in the US and with no recession priced in. Rates in the US dropped 30 bp and credit markets outperformed with spreads tighter by 50 bp. China reopening also sustained emerging markets with higher commodity prices (oil and copper).
February was the complete opposite with the same dynamics that we saw last year. Strong job markets and higher inflation surprises pushed yields and credit spreads higher. Financial conditions tightened with market pricing a terminal rate closed to 6% in the US and 4% in the Eurozone. Chinese data were still weak, and markets started to be impatient about the reopening effects.
March was the classical risk off environment with the collapse of SVB bank and followed by the merge of Credit Suisse and UBS. The SVB bank failure has pushed the Fed to revise the well telegraphed 50 bp hike by 25 bp. Credit markets deepened. The Credit Suisse collapse penalized AT1 holders and the banking sector overall. Government bonds were the winners with US rates dropping by more than 50 bp.
The failure of the regional US banks in Q1 2023 signalled the end of the bear bond cycle. In fact, Fed rate cutbacks are now priced for as early as this summer. As a result of the issues at Silicon Valley Bank, Signature, and Credit Suisse, there is now considerable uncertainty around the banking sector, which has only increased demand in money market funds that pay out more than bank deposits. If such bank withdrawals persist, a banking crisis can develop further. Europe has proven to be more resilient, so the ECB remains hawkish. Core inflation dynamics are still uptrend. Data are rebounding with commodity prices collapsing which helped the euro to outperform.
Carmignac Portfolio Global Bond generated a positive return in the first quarter. The three sources of performance (duration, currencies, and credit) contributed positively. We took advantage of the interest rate fall and the rally of the Emerging market currencies. Government bonds in the US, Canada and Germany were the biggest contributors. For the currency markets, Latam currencies (Mexican Peso, Brazilian Real, Chilean Peso) and the Indonesian Rupiah benefited from the China reopening and the high real rates those countries are giving. Our credit positioning also contributed positively thanks to CLOs (Collateralized Loan Obligations).
We still believe that the recession is coming in the US this year. The bank regional crisis is telling us that the Fed has over hiked, and the recession is near. The banks will have to tighten their credit conditions and slow the financing of the real economy.
Inflation is the last shoe to fall with the job market still strong. We expect that the job market should start to suffer with tighter financial conditions and allow the inflation coming down. The housing market and the manufacturing sector are already in recession territories. The service sector is still holding thanks to the excess savings coming from the government checks, but we expect them to be near zero at the end of this year.
The positioning is in line with this economic deterioration. The fund positioning is defensive. We have increased our duration and our core government bonds exposure. We have bought credit protection to neutralize the credit book. In the FX markets we are long the yen and the Swiss franc that should outperform in the recession context. We have low exposure to the dollar because we don’t think it will protect the fund as the recession will come first from the US. We have reduced our exposure to Latam currencies after a strong first quarter and because they might suffer in this context.
Source: Carmignac, Bloomberg, 31/03/2023. Performance of the A EUR Acc share class ISIN Code A EUR Acc : LU0336083497. 1Reference Indicator: JP Morgan GBI Global (EUR).
Carmignac Portfolio Global Bond A EUR Acc
Recommended minimum investment horizon
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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.
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.
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.
* Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time.
Carmignac Portfolio Global Bond A EUR Acc
?Year to date
|Carmignac Portfolio Global Bond A EUR Acc||-3.66 %||+8.36 %||+4.70 %||+0.12 %||-5.56 %||-0.02 %|
|Reference Indicator||+4.35 %||+7.97 %||+0.62 %||+0.60 %||-11.79 %||-2.46 %|
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|3 years||5 years||10 years|
|Carmignac Portfolio Global Bond A EUR Acc||-1.61 %||+1.53 %||+2.97 %|
|Reference Indicator||-5.04 %||-0.93 %||+1.59 %|
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Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Source : Carmignac at 30/11/2023
|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 :||1,24% 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 :||0,93% 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.|