Go beyond our prejudices against Europe

Keith Ney and Mark Denham talk about their European fund with many assets: uncertainty about the future and long-term investment.

Lipper has just named your fund “The Best Diversified Fund in Europe”. What do you attribute this success to?

05/03/2022  Keith Ney and Mark DenhamMD : Carmignac Portfolio Patrimoine Europe was launched in 2017 to offer investors a socially responsible solution with moderate risk in a constantly changing European environment. Over the past 4 years, despite a very volatile environment, our fund has managed to mitigate market downturns and participate in the upswings of both 2020 and early 2022. The fund offers investors an attractive risk / reward profile, in particular through our choice of security and our risk management strategies. In this case, the fund goes far beyond the simple distribution of bonds. As equity specialists, we conduct an in-depth analysis of our investments, ensuring that we do not accumulate risks in the portfolio. As a result, our risk management strategies have had a positive impact on the Fund’s performance since its inception. Many of the tools at our disposal have both mitigated the negative risk and provided positive gross performance. However, in the long run, it is our choice of stocks and bonds that seems to be the main factor influencing the fund’s performance, and that is what we want.

The foundation is based on the Heritage philosophy, which is characterized by a flexible, multi-component class and a long-term approach. What distinguishes Carmignac Portfolio Patrimoine Europe from the flagship fund Carmignac Patrimoine?

K.N. : Sharing the same philosophy does not necessarily mean investing the same. Carmignac Patrimoine Europe’s portfolio is very different from Carmignac Patrimoine’s European pocket. In addition to the fact that they do not have the same investment universe, which significantly affects the way they are managed, the two funds also differ in terms of choice of securities, both shares and bonds. The particularly low growth rates in Europe are forcing us to focus on global growth to make up for this shortcoming in our investment universe. Conversely, in the bond segment, tighter financial regulation and lower interest rates require a more aggressive approach to interest rate and credit markets and a desire for greater returns through greater value orientation. As a result, the two funds have very little in common and a low correlation, making them complementary to the investor’s portfolio.

What are the main risks ahead and how do you plan to manage them?

K.N. : The Russia-Ukraine conflict and related economic sanctions pose a risk of stagflation, ie a slowdown in the economy combined with high inflation. Shortages of available raw materials can lead to serious disruptions in supply chains, which will negatively affect the growth and growth of prices. Although the economic outlook for 2022 already predicted slower growth and sustained inflation, this conflict is now exacerbating the economic trends we have integrated into our investment strategy. In the short term, we are mainly concerned with the management of the bear market and the associated high volatility. In the long run, this delicate environment will be an opportunity to reap the benefits of a drastic adjustment of corporate bonds and stocks to carefully select specific features and build future portfolio performance potential. Although Europe has been particularly hard hit by this geopolitical crisis, we expect a strong budgetary response from governments that can benefit certain sectors, such as renewable energy.

Can you tell us more about these promising industries about your long-term investment opportunities?

MD : The Fund has historically been committed to promising sectors such as healthcare, technology and renewable energy. Our approach to Europe is particularly selective and based on a robust process. In the current environment, we remain true to our strategic positions, which are represented by the winning companies in their industries, but we are also making some adjustments, for example, by increasing our defensive position. Thanks to risk management strategies, we can expand the risks in these promising sectors without increasing the level of risk of the fund in the short term.

Briefly about the Carmignac portfolio European Heritage

The fund was launched in 2017 to provide investors with a sustainable solution with medium risk in a constantly changing European environment. The fund is characterized by a flexible, multi-class asset class and long-term approach. His ambition is to identify promising securities in European stock and bond markets, adapting to different market configurations, including bear markets. As a result, the level of risk in stock markets can range from 0% to 50% of the portfolio, knowing that we have the ability to change that risk at any time, allowing us to respond quickly and effectively when economic conditions, political or social, seem we demand it.

2022.05.03.  Evidential Carmignac Patrimoine

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