Carmignac

Carmignac Portfolio Grandchildren: Letter from the Fund Managers

  • +12.10%
    Carmignac Portfolio Grandchildren’s performance

    in the 1st quarter of 2023 for the A EUR Share class

  • +5.83%
    Reference indicator¹ ’s performance

    in the 1st quarter of 2023

  • +51.59%
    Performance of the Fund since inception (31/05/2019)

    vs +48.56% for the reference indicator

In the first quarter of 2023, Carmignac P. Grandchildren rise by +12.10%, while its reference indicator¹ was up +5.83%.

Markets review

Global equity markets began the year in the same vein as they ended the previous period, with continued optimism that headline inflation will continue to ease thereby reducing the need for central banks such as the Fed and ECB to increase rates much further. This mood was strengthened by growing belief that recession can be avoided owing to a strong US consumer and falling energy prices worldwide. The market rally was initially led by technology and consumer discretionary stocks, as well as other cyclical sectors like steel, autos and hotels. However, the rally was temporarily halted by the collapse of Silicon Valley Bank in March which precipitated fears over the financial sector generally. The impact of rising interest rates was evidently starting to feed through to the economy, which catalysed a recovery in many less economically sensitive stocks, for instance in the healthcare sector, and bond yields fell dramatically anticipating the weakening economic outlook.

Quarterly performance review

Our Fund, which focuses exclusively on high quality, visible, secular growth stocks is particularly well placed for this environment.

Information technology comprises 26% of our fund and was the largest contributor to our performance in the quarter. The best individual holding was Nvidia, rising a stellar 86% after full year results confirmed that the company is over the inventory correction and guidance implied an inflecting trajectory in demand in datacenter and gaming chips. Furthermore, the stock is the name most likely to benefit from the explosion in demand caused by progress in artificial intelligence (AI) through ChatGPT, as the number of graphics chips (GPUs) required will accelerate dramatically. After such a run we trimmed the position as we think the theme has become a little speculative but will re-increase on any significant pullback. Microsoft is also seen as a beneficiary of AI as ChatGPT is set to be embedded in many of their products, and its stock rose a more modest but respectable 18% accordingly. Palo Alto, the security software name, also rose 41% as demand for their suite of products continues growing in the mid 20%’s unhindered by any macroeconomic impact, and management guided for more of the same.

Healthcare represents 30% of the portfolio, albeit spread across a wide variety of sub sector including pharmaceuticals, medical devices, and life science equipment providers, and it also made a significant contribution in the period. The best performer here was Align technologies, the leading name in so-called clear aligners, which are taking share from wire braces for teeth straightening, which rose 55%. The stock had a torrid time last year as demand slowed due to a more cautious consumer, and by the year end volumes of aligners sales fell high single digit percentage in the final quarter. However the catalyst for the stock jump was management comments that they had seen the worst of the declines with growth in aligners shipped ready for first quarter sales. We used the large initial spike in the stock to cut our position materially. Management comments are encouraging but there is still a lot of uncertainty as to the impact of rising interest rates on consumer confidence and therefore demand. Eli Lilly is a name we increased in the quarter to make the stock one of our largest holdings. Together with another held name, Novo Nordisk, Lilly dominates the fast-growing market of GLP-1 drugs for treating diabetes and obesity. We see this as a trend likely to last for decades and used inexplicable weakness in Lilly which fell 8% in the quarter (in contrast to Novo which rose 16%) to materially increase our holding.

Elsewhere we benefited from having no exposure to the energy sector, which fell as the commodity price continued to ease, or to large financials in the bank and insurance sectors which were adversely affected by the well-publicised collapse of several US banks and the take-over of Credit Suisse by UBS. These sectors do not meet our stringent criteria of dependable superior profitability, so we do not believe they are capable of delivering or sustaining the best returns over the long time periods that our fund invests over. In addition, as concern over the economic environment is set to increase owing to higher interest rates, investor demand for these economically sensitive areas is likely to wane.

Outlook

Trading in the quarter was modest but we have used the macro-economic overlay, which is in intrinsic part of our process, to continue to de-emphasise cyclicality and increase defensive or less economically sensitive stocks. This is owing to the increasing uncertainty over economic activity into second half 2023. As well as increasing Eli Lilly we continue to add to staples P&G and Colgate, medical device maker Resmed and contract drug manufacturer Lonza, while trimming technology names, especially the more highly rated software names like ServiceNow and Salesforce.

Our focus remains on identifying and owning the profitable companies with high return on capital companies we believe have the best prospects for a 5 year or longer time horizon and holding stocks over this time.

Source: Carmignac, Bloomberg, data as of 30/03/2023. Performance of the A EUR Acc share class. Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. 1 Reference Indicator: MSCI WORLD (USD, dividend reinvested)

Carmignac Portfolio Grandchildren

A global, high-conviction equity fund for long-term investors

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Carmignac Portfolio Grandchildren A EUR Acc

ISIN: LU1966631001

Recommended minimum investment horizon

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Main risk 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 Grandchildren A EUR Acc

ISIN: LU1966631001
2019 2020 2021 2022 2023 2024 (YTD)
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Year to date
Carmignac Portfolio Grandchildren A EUR Acc +15.47 % +20.28 % +28.38 % -24.16 % +23.04 % +6.12 %
Reference Indicator +15.49 % +6.33 % +31.07 % -12.78 % +19.60 % +2.91 %

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3 Years 5 Years 10 Years
Carmignac Portfolio Grandchildren A EUR Acc +9.53 % - -
Reference Indicator +12.14 % - -

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Source : Carmignac at 31/01/2024 .

Maximum subscription fees paid to distributors : 4,00%
Redemption Fees : 0,00%
Ongoing Charges : 1.70%
Conversion Fee : 1%
Management Fees : 1,40%
Performance Fees : 20,00%
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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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