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Carmignac Investissement: Letter from the Fund Manager

[Management Team] [Author] Older David
Author(s)
David Older
Published on
10 January 2024
Read time
7 minute(s) read
+7.86%Carmignac Investissement performance in the 4th quarter of 2023 for the A EUR share class.
+6.42%Reference indicator’s1 performance in the 4th quarter of 2023.
+18.91%Performance in 2023 vs +18.06% for the reference indicator.

Over the quarter, Carmignac Investissement posted a positive performance of +7.86% (A EUR share), above its reference indicator (+6.42%). The fund ended the year with a performance of +18.91%, outperforming its reference indicator1 (+18.06%).

Market environment

Global financial markets experienced a roller coaster ride in 2023, driven by inflation-focused monetary policy, stronger than expected economic data and geopolitical tension. In this context, the equity markets of developed countries rallied both in the United States (+24% for the S&P500) and in Europe (+16% for the Stoxx Europe 600) mainly driven by valuation multiple expansion. Easing inflation, a resilient US economy and the prospect of lower interest rates buoyed investors, as illustrated by the strong finish to the year.

In the US, the broader market's gains were driven largely by the Magnificent Seven, which includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla. This group of stocks, at the forefront of technological changes, accounted for about two-thirds of the gains in the S&P 500 this year, following a significant jump in their earnings. More specifically, the surge in equity markets in the first half was primarily driven by the flourishing artificial intelligence (AI) investment theme, with the Magnificent Seven significantly outperforming the rest of the market despite tighter financial conditions. Although there was a set-back towards the end of the summer due to an unexpected rise in yields, falling inflation prompted central bankers to halt their monetary tightening which boosted valuations. Investor optimism regarding potential rate cuts in 2024 provided a tailwind for growth companies at the end of the year. Overall, the performance of these stocks in 2023 was impressive, particularly with the Nasdaq delivering an outstanding 43% return, while defensive sectors such as Utilities, Staples and Healthcare posted poor returns, as did Energy.

Emerging markets once again lagged behind their developed counterparts, largely due to the struggles faced by China (-16.8% for the Hang Seng). Expectations for an economic recovery after the Covid-19 mobility restriction disappointed, and China’s structural challenges, especially in the property market, dampened investor confidence. Despite the Chinese government's efforts to stimulate the economy since mid-year, concerns about deflation and the global slowdown have added to the pessimism in local markets. In Latin America, Mexico (+31.6%) has greatly benefited from the US nearshoring policy, which aims to bring production lines closer to home. On the other hand, Brazil (+28.4%) has successfully managed to control local inflation, positioning itself as one of the first countries to reverse its interest rate policy which benefited its equity market.

How did we fare in this context ?

In 2023, amidst a narrow market rally, Carmignac Investissement demonstrated its ability to outperform global markets through wise stock-picking. Our decision to overweight the Magnificient7 throughout the year has proven to be successful. Although we were only invested in 5 out of the 7 companies (excluding Apple and Tesla), we made up for it by allocating a higher weight to Microsoft, Meta and Amazon. Regarding artificial intelligence, the release of OpenAI's chatbot ChatGPT in late 2022 generated excitement among users and investors, benefiting the entire ecosystem from semiconductors to cloud-computing. As a result, our investments in companies like Microsoft, AMD, and Nvidia were up sharply. Overall, our convictions in the tech sector, the largest sector weighting in the portfolio, performed well over the year led by both the AI phenomena and the end of the monetary tightening.

Another contributing factor was the emerging theme of weight reduction medicines, brought to market by Eli Lilly and Novo Nordisk, two of our significant holdings. These companies significantly outperformed the struggling healthcare sector, which experienced one of its worst years in relative terms. As a result, our stock selection in this sector more than compensated for our overweight position. Elsewhere, the resilience of the global economy also benefited specific stocks such as Hermès, which continued to display stable and organic growth, and our aerospace convictions (Airbus, General Electric, Safran) which benefited from the ongoing strength of the travel industry.

Finally, our investments in China did not meet our expectations. Despite the appealing valuations, the consumer discretionary stocks in our portfolio were negatively impacted by the country's weak economy. This was evident in the decline of online retailer JD.com and Alibaba. Our Chinese exposure was significantly reduced over 2023.

Outlook 2024

The year 2023 was a highly successful one for equity markets, primarily due to the impressive performance of a limited number of stocks and the resurgence of valuation multiples. In the US, multiples have reached a historically high level (19.6x for the 12-month forward price-to-earnings ratio). It is challenging to envision these multiples expanding further in 2024 given the multiple rate cuts (6!) already priced in by the market. On the fundamentals, we will closely monitor corporate earnings over the year, which have experienced a mixed 2023. Despite the expected economic slowdown, the market anticipates earnings to increase over 10% across major regions, which would be robust after little growth in 2023. Given this complex landscape, it is difficult for us to form a predetermined view on the market's overall expected performance for 2024.

Nevertheless, we believe that specific opportunities are likely to arise as we expect market leadership to broaden in 2024. While we do not expect the Magnificent Seven to decline materially, we also do not anticipate the same outperformance versus the overall market as we saw in 2023. For this reason, we decided to take some profits on these names at the end of 2023, diversifying performance drivers for the fund. We continue to see compelling opportunities around artificial intelligence – both AI related infrastructure (AMD) and AI enabled digital advertising (Meta, Snap) - and weight reduction. . We have added new positions in luxury cosmetics (Estee Launder) and cybersecurity (Fortinet) were we see a clear potential for outperformance in 2024.

Finally, the upcoming rate cuts led by the Fed Chairman, Jerome Powell, are expected to result in a depreciation of the US dollar, which will be advantageous for emerging markets. With the Chinese economy gradually stabilizing, emerging markets are likely to provide opportunities for performance and diversification. However, we are currently awaiting a higher conviction to fully re-engage with China. In the meantime, we are gradually investing in proxies in developed countries such as LVMH and Estée Lauder, and exploring opportunities in Latin America (Banorte) and India (Kotak).

Source: Carmignac, Bloomberg, 31/12/2023. Performance of the A EUR acc share class ISIN code: FR0010148981.
1Reference indicator: MSCI AC WORLD NR (USD, Reinvested net dividends). 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 possible entrance fees charged by the distributor).

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+ 4.4 %+ 11.4 %+ 7.7 %
Reference Indicator+ 10.0 %+ 11.8 %+ 11.3 %

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).

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Global equities10 November 2022English

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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.

  • In Switzerland: the prospectus, KIDs and annual report are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland), S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Montrouge, Nyon Branch / Switzerland, Route de Signy 35, 1260 Nyon.

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