Carmignac Portfolio Sécurité

August was marked by a resurgence of stress in the early days of the month, followed by a return of risk appetite in anticipation of Federal Reserve forthcoming easing.

The slowdown in job creation and the rise in the unemployment rate to 4.3% across the Atlantic were the main catalysts for the risk of a hard landing scenario for the US economy.

Nevertheless, central bankers' more dovish-than-expected stance, coupled with favorable growth (upward revision of US GDP, rebound in retail sales) and inflation figures, enabled the market to recover.

The situation was similar in the eurozone, which benefited from a slowdown in inflation and wage growth, while the PMI leading indicator showed an acceleration in private-sector activity.

Despite risk aversion at the start of the month, credit spreads on the Itraxx Xover index tightened by -10bp, while the euro and US yield curves steepened, with 2-year yields easing by -14bp and -34bp respectively.

The Fund delivered a positive performance, slightly behind its reference indicator.

The portfolio mainly benefited from its carry strategies, such as credit, which also benefited from an easing in rates, particularly on the front end in a volatile environment. However, our protective measures aimed at reducing our exposure to the riskiest part of the market had a slight impact on performance.

On sovereign debt, we benefited from our long positions on the short end of German debt. Conversely, our short positions, initiated on the short end of the US curve, given the aggressive expectations of rate cuts across the Atlantic, had a slightly negative impact

Finally, the portfolio continues to benefit from the good performance of our selection of Collateralized Loan Obligations (CLOs) and our exposure to money market instruments.

The relative resilience of the various economies, characterised by a soft landing in Europe and the United States and inflation gradually returning towards target, should enable the ECB to gradually continue its rate-cutting cycle and the Fed to begin it at its September meeting.

However, given the presence of political and geopolitical risks and the increasingly tight valuations on certain markets, the portfolio is maintaining a balanced positioning with a moderate duration of 1.8.

On the one hand, a significant allocation to credit, mainly invested in short-term, highly-rated corporate bonds and CLOs, offering an attractive source of carry and a low beta relative to market volatility.

On the other hand, we are long the short end of the German yield curve, although this is partly offset by a short exposure to US short-term rates, where the rate cuts expected for 2024 seem a little excessive, particularly compared with those of the ECB.

We are also retaining protection on the credit market (iTraxx Xover), with markets trading at tight levels in a geopolitical context that remains uncertain.

Finally, we have an allocation to money market instruments, which represent an attractive source of carry with limited risk.

This balanced strategy should enable the Fund to benefit from its carry in an environment of gradual monetary normalisation, but also to cope with temporary market turbulence, as illustrated by the European and French elections in June and, more recently, fears about the health of the US economy.