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Finding distinctive opportunities in niche asset classes

Small and mid-capitalisations universe offers differentiating advantages versus their large capitalisation counterparts

12.3% volatility for emerging small capitalisation index compared with 14.1% for their large capitalisation 1


Contrary to common opinion, small capitalisation indices are not necessarily more volatile compared to large capitalisation. In fact, they often display slightly lower volatility which can partly be explained by domestic exposure and lower foreign ownership. Together with a low analyst coverage, it creates attractive opportunities for investors.

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Greater domestic exposure

76% of emerging small and mid-sized companies have greater revenues from the domestic front than overseas.2

The small and mid-capitalisation companies are more domestically oriented, catering for domestic demand, which makes them more resilient to external shocks and less correlated, on average, to global market trends.

[Insights] 2019 03_FF_Fund_CED CEE (All) EN
Source: Numeric Investor LLC, MSCI data, Bloomberg, 2017

Higher family-ownership

60% of private sector emerging small and mid-capitalisations companies are founder or family owned businesses compared with only 33% of the companies for the S&P 500.3

Large proportion of founder or family governed businesses in the Small-Mid Capitalisation universe, benefiting from a “home field” advantage, deriving from years of personal relationships with stakeholders across the value chain. This ensures a stronger personal commitment, a greater accountability from the founders/managers and an alignment of interest between the management and shareholders.

Low analyst coverage

45% of small capitalisation have no analyst coverage. 4

The low coverage lets price inefficiencies to build up over long periods, creating attractive opportunities for active investors that carry out their own groundwork (i.e. meeting company management, site visits, business models, financial and valuations analysis, ….).

Discover our two investment solutions offering differentiating advantages

Thanks to their unique features (domestic orientation and family ownership) and attractive risk return profile, small and mid-caps should not be overlooked by investors and can be used as a diversification tool.

In our emerging and European small and mid-cap Funds, we try to exploit the inefficiencies and unearth the hidden treasures of this under covered universe often misunderstood, over looked and feared by investors, thanks to our rigorous stock picking and highly selective approach.

  • Carmignac Portfolio Emerging Discovery

    Small and mid-cap stock picking Fund trying to discover the future large caps of the emerging and frontier market universe, with a selective & quality approach (healthy fundamentals companies offering long-term growth potential and attractive cash generation) in underpenetrated sectors.


    Key differentiating features of our fund

    • Offers a quality bias and a low volatility profile.

    • Provides effective portfolio diversification (92% high active share5).

  • Carmignac Euro-Entrepreneurs

    European stock picking Fund focusing on companies offering long term prospects, high sustainable profitability and that are reinvesting for the future.





    Key differentiating features of our fund

    • Exposure to innovative and disruptive companies.

    • Provides effective portfolio diversification (96% high active share6).

Thanks to their unique features (domestic orientation and family ownership) and attractive risk return profile, small and mid-caps should not be overlooked by investors and can be used as a diversification tool.

In our emerging and European small and mid-cap Funds, we try to exploit the inefficiencies and unearth the hidden treasures of this under covered universe often misunderstood, over looked and feared by investors, thanks to our rigorous stock picking and highly selective approach.

  • Carmignac Portfolio Emerging Discovery

    Small and mid-cap stock picking Fund trying to discover the future large caps of the emerging and frontier market universe, with a selective & quality approach (healthy fundamentals companies offering long-term growth potential and attractive cash generation) in underpenetrated sectors.

  • Carmignac Euro-Entrepreneurs

    European stock picking Fund focusing on companies offering long term prospects, high sustainable profitability and that are reinvesting for the future.



Discover our Fund managers top picks

  • Yihai

    (Current market cap: 4.5bn EUR)

    Market leader in Chinese hot pot preparations and major player for condiment and soup preparations.

    Family governed company with quality financial ratios:

    • 70%+ EPS growth (2018)
    • 29% ROE (2018)
    • Net cash balance sheet

    Source: Bloomberg, April 2019

  • Morphosys

    (Current market cap: 2.8 bn EUR)

    Diversified German biotechnology company focused on the development of therapeutic human antibodies, with a proprietary antibody development technology and library. The company has already a library of millions of various antibodies and over 100 new antibody projects at various stages of development


    Source: Bloomberg, April 2019

CARMIGNAC PORTFOLIO EMERGING DISCOVERY

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. EMERGING MARKETS: Operating conditions and supervision in "emerging" markets may deviate from the standards prevailing on the large international exchanges and have an impact on prices of listed instruments in which the Fund may invest. 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. LIQUIDITY: Temporary market distortions may have an impact on the pricing conditions under which the Fund might be caused to liquidate, initiate or modify its positions. The Fund presents a risk of loss of capital.

CARMIGNAC EURO-ENTREPRENEURS

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. LIQUIDITY RISK: The Fund may hold securities with reduced market exchange volumes and which may, in certain circumstances, be relatively illiquid. The Fund is therefore exposed to the risk that it may not be possible to liquidate a position in the desired time frame and at the desired price. 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.

Latest insights

Source: 1 5 year annualized volatility of MSCI EM SMID Indes compared to MSCI EM Large Cap Index, Bloomberg, 30/04/2019. EM small caps represented by the MSCI EM Small Cap Index. Emerging markets represented by the MSCI Emerging Markets Index. For illustrative and discussion purposes only. Negligible research coverage is defined as stocks having one or no research recommendations. 2 Numeric Investor LLC, MSCI data, Bloomberg, 2017 3 UBS research “Family-controlled companies. Version 4.0”, 08/11/2018 4 Bloomberg, FactSet, MSCI data, 31/12/2018. For illustrative purposes only. EM small caps represented by the MSCI EM Small Cap Index. Emerging markets represented by the MSCI Emerging Markets Index. For illustrative and discussion purposes only. Negligible research coverage is defined as stocks having one or no research recommendations. 5 Carmignac, Bloomberg, 30/04/2019. Reference Indicator: 50% MSCI Emerging Small Cap NR + 50% MSCI Emerging Mid Cap NR. Quarterly rebalanced, reinvested net dividends. 6 Carmignac, Bloomberg, 30/04/2019. Reference Indicator: 50% MSCI Emerging Small Cap NR + 50% MSCI Emerging Mid Cap NR. Quarterly rebalanced, reinvested net dividends. Carmignac Euro-Entrepreneurs (Fonds Commun de Placement)’ strategy is also available via Carmignac Portfolio Euro-Entrepreneurs, Luxembourg SICAV sub-fund - Carmignac Portfolio. The 2 funds share the same investment strategy , the same portfolio construction and the same investment process.

Promotional article. This article may not be reproduced, in whole or in part, without prior authorisation from the management company. It does not constitute a subscription offer, nor does it constitute investment advice. The information contained in this article may be partial information and may be modified without prior notice. 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. Access to the Funds may be subject to restrictions with regard to certain persons or countries. The Funds are not registered in North America, in South America, in Asia nor are they registered in Japan. The Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Funds have not been registered under the US Securities Act of 1933. The Funds may not be offered or sold, directly or indirectly, for the benefit or on behalf of a "U.S. person", according to the definition of the US Regulation S and/or FATCA. The Funds present a risk of loss of capital. The risks and fees are described in the KIID (Key Investor Information Document). The Funds' prospectus, KIIDs and annual reports are available at www.carmignac.com, or upon request to the Management Company. The KIID must be made available to the subscriber prior to subscription. Carmignac Portfolio is a sub-fund of Carmignac Portfolio SICAV, an investment company under Luxembourg law, conforming to the UCITS Directive. The Fund is a common fund in contractual form (FCP) conforming to the UCITS Directive under French law. In Switzerland, the Funds’ respective prospectuses, KIIDs and annual reports 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, Paris, succursale de Nyon/Suisse, Route de Signy 35, 1260 Nyon. 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 material was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of 10/06/2013).