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Carmignac Investissement: Letter from the Fund Manager

[Management Team] [Author] Older David
Author(s)
David Older
Published on
11 October 2023
-0.5%Performance of Carmignac Investissement1 in the 3rd quarter of 2023 for the A EUR share class vs. -0.5% for its reference indicator2.
+10.3%Performance of the Fund since the beginning of the year vs. +10.9% for its reference indicator.
+13.0%1-year performance of the Fund vs. +11.8% for its reference indicator.

Over the period, Carmignac Investissement recorded a performance of -0.5%, in line with its reference indicator (-0.5%).

Market environment during the period

The S&P 500 peaked on July 31, but fell by approximately 6% by the end of the quarter. The main characteristics of this equity market reversal are the following:

  • Valuations have been under pressure following the rise in rates: S&P 500 price/earnings ratio (1-Year forward) has dropped from 20x to 18x. However, at the same time, earnings estimates have held steady.
  • The “Big Tech 7”3 that have been driving the market since the beginning of the year are no longer providing strong leadership. This, too, is a valuation story.
  • From a sector point of view, following the sharp move in rates, bond proxies (utilities and real estate) have performed poorly. At the opposite end of the spectrum, energy has benefited from the resurgent oil price, while defensive healthcare performed relatively well.

How did we fare in this context ?

During the period, the absolute performance of the Fund suffered from the market correction as well as from some individual convictions. Hermes was down 13% over the quarter after a strong performance since the beginning of the year, penalized by higher rates and decelerating growth in China and Europe. Block, the merchant payments innovator, was also down over the quarter as the company weathered a series of setbacks, including a 48-hour outage on its Square payments app, and the sudden departure of an executive weeks later.

However, despite a negative backdrop for equity markets we managed to generate alpha over the quarter mostly thanks to our stock selection in Healthcare (Novo Nordisk and Eli Lilly) as well as some companies like UBS, Schlumberger and Alibaba.

Outlook

For equity markets, the two key factors to watch for the rest of the year are the rates and earnings dynamics.
On the rates front, the upward pressures on long term rates should ease as the deceleration of the economic cycle is gaining traction and the end of the hiking cycle is finally in sight (even more so as the past weeks’ movements in bond yields are tightening financial conditions even further). Any relief on rates will be positive for equity valuations and therefore corporate earnings will once again become the differentiating factor. However, we believe 2024 earnings expectations may still be overly optimistic, leaving room for downward revisions. Higher interest rates take time to affect earnings – despite wage pressure, corporate margins remain historically high – so the sustainability of this is a question. At this point it seems we are likely to face downward revisions in earnings expectations.

In this environment, quality growth companies offering higher and stable profit margins over time, as well as powerful secular trends such as artificial intelligence (AI) and the fight against obesity should be performance differentiators.

The healthcare sector is still our main overweight in the fund with Eli Lilly as our largest holding. Over the quarter, we had further positive developments regarding weight loss drugs. During late-stage trial preliminary results, Eli Lilly’s comparable Novo Nordisk was able to show a 20% reduction in cardiovascular events, i.e. heart attacks / strokes, for people treated with weight loss drugs vs. a placebo. These results are derisking the forward adoption curve for these drugs, expanding the addressable market that we estimate could reach $100bn in peak sales by the early 2030s.

To diversify our portfolio and to adapt to a stickier inflationary/higher interest rate backdrop than over the previous decade, we maintain an exposure to growth companies but within a wider set of sectors. Over the last year, we have reinforced our investments in the industrial sector in which we are very selective: avoiding short cycle exposure to favor long cycle plays. Airbus, the leading supplier in a secularly growing commercial aerospace market, is our biggest weight in the sector. A tight aircraft supply market given strong structural travel trends will provide a solid demand backdrop as Airbus ramps up production at a higher margin than during the pre-COVID era.

1Source: Carmignac 30/09/2023.
2Reference indicator: MSCI AC WORLD NR.
3Big Tech 7 : Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia and Tesla

Carmignac Investissement

A Fund geared for a changing worldDiscover the fund page

Carmignac Investissement A EUR Acc

ISIN: FR0010148981
Recommended minimum investment horizon
5 years
Risk indicator*
4/7
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.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.

Fees

ISIN: FR0010148981
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
1,50% of the value of your investment per year. This estimate is based on actual costs over the past year.
Performance fees
20,00% max. of the outperformance once performance since the start of the year exceeds that of the reference indicator and if no past underperformance still needs to be offset. 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
1,09% 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: FR0010148981
Carmignac Investissement10.41.32.14.8-14.224.733.74.0-18.318.9
Reference Indicator18.68.811.18.9-4.828.96.727.5-13.018.1
Carmignac Investissement+ 2.0 %+ 9.9 %+ 7.5 %
Reference Indicator+ 8.5 %+ 10.5 %+ 11.0 %

Source: Carmignac at 30 Apr 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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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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