Carmignac defies its critics by tackling emerging markets

Carmignac Gestion’s strong performance this summer has silenced its critics and boosted confidence in the newly launched Carmignac Emerging Patrimoine.

The founder and chairman of Carmignac, Edouard Carmignac (pictured), admitted his group needed to be “gutsy” to launch the fund at a time when “emerging markets are being decimated”.

“We are not scared of taking decisions, even when markets are diverse,” he affirmed.

The Carmignac Emerging Patrimoine fund is aiming to capture emerging markets growth while the developed world stagnates.

Carmignac’s managers believe the outperformance of emerging markets in the wake of the 2008 financial crisis is likely to resurface.

According to Frédéric Leroux, global allocation manager at Carmignac, emerging markets will soon pick up, whereas developed markets are encountering “a great contraction”, similar to that of Japan in the 1990s or the US in the 1930s.

The solvency problem in the EU and pressure to reduce deficits will cause governments to increase taxes and kill growth in the long term, Léroux warns, leading to a number of “bounces and big disappointments” in Europe.

Investors seem to agree and have already allocated €100m to the fund since its launch this April, even though its marketing campaign has only just begun.

It was seeded with €20m by Carmignac Gestion, bringing total assets under management to €120m.

According to Didier Saint-Georges, member of Carmignac’s investment committee, its total assets could “easily” reach €2bn in two years, as it can structurally handle large amounts.

This means the fund will invest as if it has already reached the €2bn threshold, targeting large-cap companies to ensure there are no problems with the fund’s investment process when assets begin to mount. 

Carmignac Emerging Patrimoine is structured as a balanced fund and will concentrate on three asset classes: fixed income, equities and currencies.

Its structure is similar to Carmignac’s flagship mutual fund, Carmignac Patrimoine A, which has experienced a roller coaster year.

Caution pays off

At the start of 2011, many believed Patrimoine A’s performance was “below par”, Saint-Georges says.

It produced negative returns in five of the first six months of the year, bringing year-to-date performance to negative 4.6% at the end of June.

“We could have invested in European bank debt, which offered high yields at the beginning of the year, but we said, ‘No, it’s not sound,’” Saint-Georges explains.

His caution paid off by the summer when most European funds were pummelled, while Carmignac Patrimoine A was up 1.63% in July and 1.12% in August.

Saint-Georges believes structuring Carmignac Emerging Patrimoine in a similar manner will enable it to protect clients’ capital in comparable markets and generate solid performance in the medium term.




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