Carmignac

Carmignac Portfolio Family Governed: Letter from the Fund Manager

  • Author(s)
    Mark Denham
  • Published
  • Length
    5 minute(s) read
  • +5.48%

    Carmignac Portfolio Family Governed performance in the 1st quarter of 2023 for the A EUR Acc share class

  • +5.41%

    Reference indicator’s performance in the 1st quarter of 2023 for MSCI AC World Index Net Return (EUR)

During the first quarter of 2023, the return of Carmignac Portfolio Family Governed (A share class) was +5.48%, above its reference indicator 1, which rose 5.41%.

Quarterly Performance Review

Global equity markets performed well in the quarter, driven, initially, by increased confidence in the economic outlook for the year, due to resilient consumer spending in US, falling energy prices in Europe and excitement at the prospect of China re-opening from lockdowns. Expectations of falling headline inflation were also positive as that would imply the worst of the interest rate rises is behind us. In March however, sentiment was dented by the collapse of 3 US banks and the forced acquisition of Credit Suisse by UBS, as tightening financial conditions start to take their toll. Although the market recovered as the month progressed, this was led by the less economically sensitive names reflecting heightened concern over the future trajectory of economic growth and corporate profit growth in second half 2023 and into 2024.

The market rally was led by the information technology sector, where we do not usually find many family-controlled businesses that also meet our stringent financial criteria. However, among the names that do, security software provider Fortinet delivered a particularly strong return rising +33% after delivering a strong set of results for the previous quarter and guiding for more than 20% revenue and order growth in 2023, even factoring in an assumed economic slowing in the second half of the year. We see this sub sector as seeing sustainable growth for the foreseeable future and notwithstanding the strong performance maintain the stock as one of the larger holdings in the fund. Veeva, the specialist provider of software for the healthcare sector was also among the better performers, rising 12%, buoyed by management giving growth and profitability targets for the next 2 years underlining the favourable trend of increased use of standardised software across the health sector.

In contrast, the healthcare sector itself, where we have a large exposure at about 40% of the fund, delivered a much more mixed set of returns. On the positive side, Straumann, the dental implant maker, rose 28% after guiding for better than hoped sales growth this year of high single digits, as patient demand worldwide continues to grow post covid, and the company penetrates further into the lower priced market segment and into the clear aligner, teeth straightening, market. Demant the hearing aid manufacturer rose 21% as results confirm they are taking market share away from the other major providers due to recent product launches. Furthermore, after poor performance last year the stock had fallen to a historically low price to earnings ratio of about 17x which did not adequately reflect the group’s growth prospects or profitability. There is also merger speculation in the air. The foundation that controls Demant increased its voting stake in struggling hearing aid company GN Store Nord to above 10%, raising the prospect of the foundation creating a Danish powerhouse in the sector.

On the negative side in healthcare the worst performing name in the fund was diagnostics company Diasorin whose shares fell -26% after disappointing full year results driven by a faster drop in covid-related revenues and cost inflation. To make matters worse they are delaying the roll-out of 2 new platforms, which are instrumental for future growth, owing to supply chain difficulties. Despite these difficulties we expect the firm to benefit from these new innovations as well as stable underlying operations excluding covid-related business. Swiss giant Roche was also weak, falling -8%, as investors continue to worry about a potential lack of sales growth over the medium term owing to a perceived lack of R&D productivity and few dial-changing pipeline catalysts in 2023. However, we believe valuation at below 14x earnings at quarter end does not reflect the potential for either pipeline surprises or the potential for management using M&A to supplement future sales and profits.

The consumer sector was the best one for us in the period, with cosmetics company L’Oreal rising +23%, and luxury companies Hermes and LVMH rising +29% and +24% respectively. All names benefited from several factors: strong earnings reports for the final quarter of 2022, a less bleak outlook for consumers worldwide than thought several months ago as recession risks have abated, but also expectations that they will be prime beneficiaries of the reopening of the Chinese market.

How is the fund positioned?

In contrast to the prior quarter, we have been much less active in 2023 so far. The main changes have been to significantly increase US pharmaceutical name Eli Lilly, where the weakness in the stock in the period gave us the opportunity to gain more exposure to the vast growth opportunity their diabetes and obesity medication Mounjaro will surely enjoy. To fund this, we have reduced some of the US focused economically sensitive names such as payroll service name Paychex, uniform provider Cintas, as well as Marriott Hotels.

What is our outlook for the coming months?

Although the macroeconomic outlook has softened somewhat through the quarter, we maintain our methodical and long-term investment process. We invest in fundamentally high-quality companies which also have a significant family or founder shareholder to guide the company and enable long-term strategic decisions. Detailed corporate governance analysis is essential to identify the most beneficial names among this group.

1Sources: Carmignac, Bloomberg, 31/03/2023. ¹MSCI AC World Index Net Return (EUR). Performance of the A EUR acc share class. Past performance is not a reliable indicator 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 Portfolio Family Governed

A global, high-conviction equity fund that invests in family companies

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Carmignac Portfolio Family Governed A EUR Acc

ISIN: LU1966630706

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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.

Carmignac Portfolio Family Governed A EUR Acc

ISIN: LU1966630706
2019 2020 2021 2022 2023 2024 (YTD)
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Year to date
Carmignac Portfolio Family Governed A EUR Acc +11.15 % +16.01 % +27.00 % -18.60 % +20.65 % +10.62 %
Reference Indicator +15.21 % +6.65 % +27.54 % -13.01 % +18.06 % +10.61 %

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3 Years 5 Years 10 Years
Carmignac Portfolio Family Governed A EUR Acc +9.35 % - -
Reference Indicator +10.01 % - -

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Source : Carmignac at 28/03/2024

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 : 1,80% 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.
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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 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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