Carmignac P. Unconstrained Credit: the Fund Manager's thought
In the third quarter of 2020, Carmignac Portfolio Unconstrained Credit posted a performance of +4.12% versus a +2.14% gain for its reference indicator, generating a +1.98% outperformance. For the first nine months of the year, the Fund returned a performance of +4.30%, while its reference indicator is down -0.02%.
Life is far from having gotten back to what it was before Covid 19, but the third quarter of 2020 was much closer to normality than the first half of the year. This is also true for credit markets which, gradually, are becoming driven again by the long term trend which had prevailed for the past years: investors are anxious, fearful of credit accidents (be it downgrades or defaults) while an abundance of capital remains allocated to the asset class.
Covid-19 case:
Managing Carmignac P. Unconstrained Credit Through a Market Dislocation (%)
Source: Carmignac as at 05/06/2020. A EUR Share class ¹75% ICE BofA Euro Corporate Index (ER00) and 25% ICE BofA Euro Hight Yield Index (HE00) calculated with coupons reinvested and rebalanced quarterly.Past performance is not necessarily indicative of future performance.The return may increase or decrease as a result of currency fluctuations. Performance are net of fees(excluding applicable entrance fee qcuired to the distributor)¹CCR= Carmignac P. Unconstrained Cred,*CDS=Credit Default Swap.
This environment bears a lot of similarities with the first half of 2016 or, closer to us, the first half of 2019. We expect the coming months to be similarly fertile for bond pickers. This is not to say it will be a smooth or easy ride. We are already seeing a sharp rise in credit rating downgrades and defaults and we expect more accidents in the next quarters.
They default because their business models have been disrupted or competed away and/or because investors have not been careful in their due diligence and analysis when assessing how much debt they can bear.
Recessions only lower the willingness and ability to kick the can down the road. Hence, the measures taken to fight Covid19 will have an important impact on default rates but there would have had a high occurrence of defaults in the coming years even without this virus. It will mostly act as a catalyst, precipitating defaults which would have occurred in two or three years.
This is why we always keep in perspective the multiyear outlook of a full credit cycle when picking investments and deciding how much risk we want to put in the portfolio - while credit markets tend to price only short-term default rates, which is akin to driving a motorbike looking only one meter in front of the handlebar.
We are excited by the opportunities we see ahead. During the past months, the fund has benefited from high quality credit repricing to a more normal level. Yet we still have in our portfolio many bonds from solid businesses with sound business models, good balance sheets and continuous access to liquidity, yielding far in excess than their fundamental cost of risk, even under the assumption of a painfully slow economic recovery.
We also see a lot of excess spread in Collateralized Loan Obligations (“CLOs) tranches, with very limited fundamental risk - we would need much more pessimistic assumptions to break those tranches than what is needed to break other asset classes. As a result, we believe the risk-adjusted yield of the fund is very attractive at the moment. Beyond our current portfolio, as we wrote above, we expect the upcoming wave of accidents will keep risk aversion high and create numerous investment opportunities, long and short.
Performances
| Carmignac Portfolio Credit | 1.8 | 1.7 | 20.9 | 10.4 | 3.0 | -13.0 | 10.6 | 8.2 | 2.9 |
| Indicateur de référence | 1.1 | -1.7 | 7.5 | 2.8 | 0.1 | -13.3 | 9.0 | 5.7 | 1.2 |
| Carmignac Portfolio Credit | + 4.2 % | + 3.9 % | + 5.7 % |
| Indicateur de référence | + 1.8 % | + 0.7 % | + 1.4 % |
Source : Carmignac au 28 févr. 2025.
Les performances passées ne préjugent pas des performances futures. Elles sont nettes de frais (hors éventuels frais d’entrée appliqués par le distributeur).
Indicateur de référence: 75% ICE BofA Euro Corporate index + 25% ICE BofA Euro High Yield index. Rebalancé trimestriellement.
Carmignac Portfolio Credit A EUR Acc
- Durée minimum de placement recommandée
- 3 ans
- Indicateur de risque*
- 2/7
- Classification SFDR**
- Article 6
*Echelle de risque du KID (Document d’Informations Clés). Le risque 1 ne signifie pas un investissement sans risque. Cet indicateur pourra évoluer dans le temps. **Le Règlement SFDR (Sustainable Finance Disclosure Regulation) 2019/2088 est un règlement européen qui demande aux gestionnaires d’actifs de classer leurs fonds parmi notamment ceux dits : « Article 8 » qui promeuvent les caractéristiques environnementales et sociales, « Article 9 » qui font de l’investissement durable avec des objectifs mesurables, ou « Article 6 » qui n'ont pas nécessairement d'objectif de durabilité. La classification SFDR des Fonds peut évoluer dans le temps. Pour plus d’informations, visitez : https://eur-lex.europa.eu/eli/reg/2019/2088/oj?locale=fr.
Principaux risques du Fonds
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Quelles opportunités sur les marchés du Crédit chez Carmignac ?
Intervenant(s) : Alexandre DeneuvilleFonds obligataires à échéance : L’histoire continue avec Carmignac Credit 2031
