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Charles
Zerah
International fixed income fund that implements interest rate, credit and currency strategies across the
globe with a total return approach. Its flexible and opportunistic style enables the Fund to implement a largely
unconstrained, conviction-driven allocation and swiftly adapt, when necessary, to fully exploit opportunities in
all market conditions.
In the first quarter of 2017, Carmignac Portfolio Global Bond
posted a +1.82% gain that put it well ahead of its reference
indicator, which was up +0.04%. As in the preceding quarter,
higher prices for the corporate and emerging-market sovereign
bonds in our portfolio buoyed our performance. At the same time,
we maintained our cautious approach to the Fund’s modified
duration and currency allocation.
Fixed income component
In our previous report, we voiced our concern that inflation
would pick up in the United States and Europe and opted for low
modified duration to hedge against the attendant risk. US and
European consumer price indices confirmed our expectations,
rising significantly in the first quarter. But as bond investors
had already priced in that rise, ten-year sovereign bond yields
barely budged – they shed just 5 basis points in the United
States and added a mere 15 in Germany. Our macroeconomic
outlook for more synchronised global growth and higher
inflation hasn’t changed much over the last few months (see
our Macroeconomic Analysis), which is why we intend to
maintain our cautious approach to bond markets. A further
argument in support of that approach is a French presidential
election campaign marked heavily by the Eurosceptic views
of Marine Le Pen and several other candidates. In light of the
high risks and low yields involved, Carmignac Portfolio Global
Performance of the fund since its launch
190
180
170
160
150
140
130
120
110
100
90
12/07 03/08
74%
51%
43%
40%
03/09
03/10
03/11
03/12
03/13
03/14
03/15
03/16 03/17
––– Carmignac Portfolio Global Bond A EUR acc
––– JP Morgan GBI Global (EUR) (accrued interest)
---- Carmignac Portfolio Global Bond A EUR acc rebased at 01/03/2010,
date of the beginning of fund management by C. Zerah
---- JP Morgan GBI Global (EUR) (accrued interest) rebased at 01/03/2010,
date of the beginning of fund management by C. Zerah
06/08
06/09
06/10
06/11
06/12
06/13
06/14
P​ ast performance is not necessarily indicative of future performance. Performances are net of fees
(excluding applicable entrance fee due to the distributor).
Bond holds no French or European peripheral sovereign debt
aside from Greek government paper with maturities of under
two years, which accounts for roughly 3% of the Fund’s assets.
As soon as the French presidential election is over, the global
economic recovery theme will likely get new wind in its sails – to
the detriment of the fixed income space. We therefore see a need
for further prudent management of the Fund’s overall modified
duration. At the same time, the global economic upturn and the
pickup in inflation (though mild) should work to the advantage of
emerging markets and their sovereign debt issues. Over the past
twelve months, we have made that asset class a key component
of our portfolio so as to reap the benefits of the emerging
world’s economic vibrancy. We have diversified our allocation by
investing in Mexican and Brazilian local currency bonds and in
the external debt of commodity-producing countries.
Lastly, we remain cautious on developed country government
bonds. Not only are yields low, but a cyclical rise in inflation and
substantial political risk in Europe appear to be on the cards.
This contrasts with our more constructive, yet highly selective
approach to emerging-market debt.
Credit component
As previously, our holdings in this asset class consisted of
energy sector bonds issued mainly in emerging markets,
bank bonds primarily from Europe, and structured credit. All
three contributed to the Fund’s positive performance in the
first quarter of the year. The subordinated bank bonds in the
portfolio recorded further gains, due to higher profit margins at
the issuing banks that allowed us to scale back our positions
via profit-taking. With oil prices softening, we moved at the
end of the quarter to beef up our exposure to oil exploration
companies in Mexico and Brazil. Our global macroeconomic
outlook has convinced us to stick to those three investment
themes, all of which should benefit from the pickup in inflation.
Paper issued by banks and oil companies and European CLOs
account for roughly 20% of the Fund’s assets.
Currency component
At the beginning of the first quarter, our currency risk related
mainly to the euro, but we also maintained exposure to the
US dollar to hedge against a possible rate hike by the Federal
Reserve and the risks associated with upcoming elections in
Europe. We ended the quarter with the same dollar exposure,
which was in the vicinity of 30%. The Fund was hurt by
* Risk scale from 1 (lowest risk) to 7 (highest risk); risk 1 doesn’t mean an investment without risk. The risk category associated with this fund is not guaranteed and may change with time.
58 / Management report
F I X E D I N C O M E M A N AG E M E N T
To conclude, we are maintaining our cautious approach to
developed-country government bonds, as well as our diversified
allocation to emerging-market sovereigns and to corporate
bonds. With inflation now gaining traction in the US and Europe
and political risk on the rise in continental Europe, the Fund’s
modified duration is bound to remain low. We will also continue
with our prudent approach to currency allocation.
Bond portfolio (derivatives excluded) Rating breakdown (%)
Net currency exposure of Euro share classes (%)
41.1
AAA
6.9
AA
8.6
BBB
9.2
BB
No rating
JPY
GBP
22.8
10.9
-5.1
4.6
0.1
AUD and CAD
0.6
Latin America
Energy
19,7
9.9
Eastern Europe, Middle East and Africa
1.2
Other
0.1
Bond portfolio (derivatives excluded) Maturity breakdown (%)
< 1 year
43.4
Financials
58.6
-2.0
CHF
Sector breakdown (derivatives excluded) (%)
33.5
1 - 3 years
40.4
Information Technology
8.2
3 - 5 years
Materials
7.5
5 - 7 years
Consumer Discretionary
24,6
EUR
A
B
32.7
USD
7 - 10 years
0.4
12.1
7.2
3.9
1,6
22.2
> 10 years
21.0
Modified duration of the bond portfolio
(derivatives included)
Statistics (%)
Euro
-0.44
Fund volatility
United States
1.82
Benchmark volatility
6.13
7.08
Other
0.96
Sharpe ratio
2.41
1.27
Beta
0.50
0.78
Alpha
0.16
0.14
1 year
3 years
4.28
6.54
Calculation period: weekly (1 year) and monthly (3 years).
Quarterly gross performance contribution (%)
Equity
Portfolio Bond
Portfolio Bond
Derivatives
Currency
Derivatives
Total
Value at Risk (%)
0.11
2.96
0.00
-0.69
2.38
99% - 20 days (2 years)
Cumulative performance (%)
Since
30/12/2016
3
months
6
months
1 year
3 years
Fund
Reference indicator
4.12
4.97
5 years
10 years
Since the first NAV
Carmignac Portfolio Global Bond A EUR acc
1.82
1.82
3.58
9.98
26.56
36.03
-
42.59
JP Morgan GBI (Eur) (Accrued interest)
0.04
0.04
-2.26
2.84
26.74
22.79
-
74.47
Category average*
0.79
0.79
1.32
4.94
21.98
23.52
-
69.92
Ranking (quartile)
1
1
1
1
2
1
-
4
* Global Bond. P​ ast performance is not necessarily indicative of future performance. Performances are net of fees (excluding applicable entrance fee due to the distributor).
CARMIGNAC
FIRST QUARTER 2017 / 59
FIXED INCOME MANAGEMENT
the near-3.5% appreciation of the yen against the euro, as
Japanese investors repatriated a considerable amount of
funds prior to the annual closure of their books on 31 March.
However, we intend, as before, to steer clear of the Japanese
currency, particularly because the Bank of Japan is likely to
continue with quantitative easing.
FIXED INCOME MANAGEMENT
HOLDINGS CARMIGNAC PORTFOLIO GLOBAL BOND AT 31/03/2017
Cash, cash equivalents and derivatives operations
Cash (including collateral cash from derivative positions)
Fixed income investments
Emerging markets fixed rate Government bonds
89 000 BRAZIL 01/07/2020 (Brazil)
11 000 000 TUNISIA 5.62% 17/02/2024 (Tunesien)
10 000 000 ARGENTINA 2.26% 31/12/2038 (Argentina)
33 419 661 ARGENTINA 7.82% 31/12/2033 (Argentina)
10 000 000 BAHRAIN 7.00% 12/10/2028 (Bahrain)
60 000 BRAZIL 10.00% 01/01/2027 (Brazil)
15 000 000 BRAZIL 5.62% 21/02/2047 (Brazil)
1 080 000 000 CZECH REPUBLIC 0.00% 10/02/2020 (Czech Republic)
1 069 570 000 CZECH REPUBLIC 0.00% 17/07/2019 (Czech Republic)
15 800 000 KUWAIT 2.75% 20/03/2022 (Kuwait)
430 000 000 MEXICO 7.50% 03/06/2027 (Mexico)
15 400 000 RUSSIA 4.75% 27/05/2026 (Russia)
9 150 000 SAUDI ARABIA 2.38% 26/10/2021 (Saudi Arabia)
5 000 000 TURKEY 4.88% 16/04/2043 (Turkey)
5 000 000 TURKEY 6.75% 30/05/2040 (Turkey)
Developed countries fixed rate Government bonds
5 000 000 GREECE 3.38% 17/07/2017 (Greece)
25 000 000 GREECE 4.75% 17/04/2019 (Greece)
120 000 000 UNITED STATES 0.50% 30/04/2017 (USA)
60 000 000 UNITED STATES 0.50% 31/07/2017 (USA)
50 000 000 UNITED STATES 0.88% 15/10/2017 (USA)
50 000 000 UNITED STATES 1.00% 15/09/2017 (USA)
Developed countries inflation-linked Government bonds
40 000 000 USA I/L 0.12% 15/07/2026 (USA)
80 000 000 USA I/L 0.62% 15/01/2026 (USA)
Emerging countries inflation-linked Government bonds
20 000 BRAZIL I/L 6.00% 15/08/2050 (Brazil)
35 000 000 MEXICO I/L 4.00% 08/11/2046 (Mexico)
600 000 000 RUSSIA I/L 2.50% 16/08/2023 (Russia)
Developed countries fixed rate corporate bonds
4 000 000 DANSKE BANK 6.12% 28/03/2024 (Denmark)
1 500 000 000 JP MORGAN 0.00% 22/02/2032 (USA)
4 000 000 LOCK AS 7.00% 15/08/2017 (Norway)
12 300 000 MERCURY BONDCO PLC 7.12% 30/11/2017 (Italy)
6 000 000 SEVERSTAL (STEEL CAP) 3.85% 27/08/2021 (Luxembourg)
5 000 000 SOCIETE GENERALE 6.75% 07/04/2021 (France)
5 000 000 SOCIETE GENERALE 7.88% 18/12/2023 (France)
15 000 000 UBS AG 5.12% 15/05/2024 (Switzerland)
10 000 000 UNIPOLSAI SPA 5.75% 18/06/2024 (Italy)
Developed countries floating rate corporate bonds
6 873 SOLOCAL GROUP TV 15/03/2022 (France)
Emerging markets fixed rate corporate bonds
4 800 000 GENNEIA SA 8.75% 20/01/2020 (Argentina)
2 107 000 PETROBRAS ARGENTINA SA 7.38% 21/07/2020 (Brazil)
10 000 000 PETROBRAS GLOBAL FINANCE BV 6.12% 17/01/2022 (Brazil)
15 000 000 PETROBRAS GLOBAL FINANCE BV 7.38% 17/01/2027 (Brazil)
15 000 000 PETROLEOS MEXICANOS 6.50% 13/03/2027 (Mexico)
20 000 000 PETROLEOS MEXICANOS 6.75% 21/09/2047 (Mexico)
6 000 000 POLYUS GOLD INTL LTD 5.25% 07/02/2023 (Russia)
Developed countries convertible corporate bonds
25 000 000 MITSUBISHI UF 4.17% 15/12/2050 (Japan)
Asset Backed Securities
2 000 000 APOLLO MANAGEMENT, ALME LOAN FUNDING V (Europe)
2 000 000 ARES MANAGEMENT, ARES EUROPEAN CLO VIII (Europe)
2 500 000 KKR CREDIT ADVISORS, AVOCA CAPITAL CLO X (Europe)
5 000 000 KKR CREDIT ADVISORS, AVOCA CAPITAL CLO XIV (Europe)
2 000 000 CSAM, CADOGAN SQUARE CLO VI (Europe)
2 000 000 CARLYLE, CARLYLE GMS EURO CLO 2013-1 (Europe)
2 200 000 CVC CREDIT PARTNERS, CVC CORDATUS VIII (Europe)
5 000 000 PRAMERICA, DRYDEN 46 EURO CLO (Europe)
2 000 000 ALCENTRA, JUBILEE CLO 2015-XV (Europe)
1 000 000 BAIN CREDIT, NEWHAVEN CLO (Europe)
1 000 000 BAIN CREDIT, NEWHAVEN II CLO (Europe)
2 000 000 OAK HILL ADVISORS, OAK HILL ECP III (Europe)
2 500 000 BLACKSTONE/GSO, ORWELL PARK (Europe)
4 000 000 PARTNERS GROUP, PENTA CLO 2 (Europe)
2 000 000 BAIN CREDIT, RYE HARBOUR CLO (Europe)
7 400 000 CHENAVARI, TORO EUROPEAN CLO 1 (Europe)
5 200 000 CHENAVARI, TORO EUROPEAN CLO 2 (Europe)
3 600 000 TIKEHAU CAPITAL, TIKEHAU CLO II (Europe)
Equities
356 529 SOLOCAL GROUP (France)
Portfolio value
Net assets
60 / Management report
Price in currencies
Real Brazil
Euro
Euro
Euro
Dollar
Real Brazil
Dollar
CZK
CZK
Dollar
Mexican peso
Dollar
Dollar
Dollar
Dollar
738.49
100.28
60.87
105.95
104.46
1 023.31
97.37
100.11
100.74
100.34
102.90
104.50
98.34
85.95
107.19
Euro
Euro
Dollar
Dollar
Dollar
Dollar
98.57
95.01
99.98
99.91
99.97
100.07
Dollar
Dollar
97.74
101.97
Real Brazil
Mexican peso
Russian Ruble
Financials (subordinated debt)
Financials
Financials
Information Technology
Materials
Financials (subordinated debt)
Financials (subordinated debt)
Financials (subordinated debt)
Financials (subordinated debt)
Consumer Discretionary
Energy
Energy
Energy
Energy
Energy
Energy
Materials
Financials (subordinated debt)
CLO (BB tranche)
CLO (BB tranche)
CLO (B tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (B tranche)
CLO (B tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (B tranche)
CLO (B tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (BB tranche)
CLO (BB tranche)
Consumer Discretionary
3 385.02
106.52
96.23
100.45
7.17
105.69
100.64
100.31
104.37
101.03
102.68
98.29
99.54
104.52
104.42
104.92
106.63
107.71
101.57
102.42
50.25
99.21
100.02
92.73
96.61
96.00
95.63
93.90
98.96
95.92
97.75
89.00
94.97
94.17
96.86
100.02
96.06
99.45
99.41
1.00
Total value (€)
% of net assets
-18 678 784.54
-18 678 784.54
918 286 643.35
264 779 645.84
19 355 177.21
11 110 474.66
6 090 538.89
36 098 450.95
10 080 864.75
18 080 942.35
13 752 162.12
40 009 177.20
39 871 350.00
14 840 016.99
22 454 424.21
15 289 690.89
8 502 160.76
4 124 538.36
5 119 676.50
292 188 114.15
5 049 117.81
24 897 705.48
112 411 063.20
56 094 180.56
46 929 137.27
46 806 909.83
115 119 533.78
37 049 672.05
78 069 861.73
41 278 828.43
19 936 779.80
10 718 959.73
10 623 088.90
67 056 134.05
3 761 136.82
5 340 968.32
4 265 631.11
12 496 062.00
5 649 911.95
5 384 218.41
4 832 388.62
15 039 767.50
10 286 049.32
684 096.00
684 096.00
71 967 399.13
4 772 710.02
2 086 826.78
9 934 185.71
15 178 661.59
15 161 454.19
19 041 559.53
5 792 001.31
12 665 346.58
12 665 346.58
52 547 545.39
2 010 151.00
2 039 516.13
2 378 858.17
4 884 661.72
1 938 078.80
1 912 671.00
2 065 800.00
5 074 945.67
1 939 530.11
989 052.34
899 402.20
1 917 202.87
2 378 054.14
3 903 238.67
2 022 070.84
7 183 008.57
5 354 455.60
3 656 847.56
355 815.94
355 815.94
919 210 119.43
-2.08
-2.08
102.04
29.42
2.15
1.23
0.68
4.01
1.12
2.01
1.53
4.45
4.43
1.65
2.50
1.70
0.94
0.46
0.57
32.47
0.56
2.77
12.49
6.23
5.21
5.20
12.79
4.12
8.67
4.59
2.22
1.19
1.18
7.45
0.42
0.59
0.47
1.39
0.63
0.60
0.54
1.67
1.14
0.08
0.08
8.00
0.53
0.23
1.10
1.69
1.68
2.12
0.64
1.41
1.41
5.84
0.22
0.23
0.26
0.54
0.22
0.21
0.23
0.56
0.22
0.11
0.10
0.21
0.26
0.43
0.22
0.80
0.59
0.41
0.04
0.04
102.14
899 963 674.75
100.00
CARMIGNAC
FIRST QUARTER 2017