Carmignac Portfolio Grandchildren: Letter from the Fund Managers

Published on
10 January 2024
Read time
6 minute(s) read
+6.19%Performance in the 4th quarter of 2023 for the A EUR share class vs +6.79% for the reference indicator.
+23.04%Performance in 2023 vs +19.60% for the reference indicator.
+11.75%Annualized performance since launch (31/05/2019) vs +11.97% for the reference indicator.

Over the quarter, Carmignac Portfolio Grandchildren posted a positive performance of +6.19% (A EUR share), slightly below its reference indicator (+6.79%). The fund ended the year with a performance of +23.04%, outperforming its reference indicator1 (+19.60%).

Market environment

Global financial markets experienced a roller coaster ride in 2023, driven by monetary policies, strong economic data, and geopolitical events. In this context, the equity markets of developed countries rallied both in the United States (+24% for the S&P500) and in Europe (+16% for the Stoxx Europe 600) mainly drive by valuation multiple climbing. Easing inflation, a resilient US economy and the prospect of lower interest rates buoyed investors, as illustrated by the first semester or the last 2 months of the year.

In the US, the broader market's gains were driven largely by the so-called Magnificent 7 companies, which includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla. The group of stocks at the forefront of technological changes accounted for about two-thirds of the gains in the S&P 500 this year, following a significant jump in their earnings. More specifically, the surge in equity markets in the first semester has primarily been driven by the flourishing artificial intelligence investment theme, with the Magnificent 7 significantly outperforming the rest of the market despite tighter financial conditions. Although there was a bearish rally towards the end of the summer due to an unexpected rise in yields, falling inflation prompted central bankers to halt their monetary tightening, which boosted valuations. Investor optimism regarding potential rate cuts in 2024 benefits at the end of the year for growth companies. Overall, the performance of these stocks in 2023 was impressive, particularly with the Nasdaq delivering an outstanding 43% return, while defensive sectors such as Utilities, Staples or Healthcare posted close to negative returns, as did Energy.

How did we fare in this context?

In this context, the Fund generated a positive return in 2023 and outperformed its reference indicator, mainly thanks to our rigorous stock selection despite high dispersion among quality companies. Within our portfolio, two themes significantly contributed to the Fund's performance: artificial intelligence and obesity treatments. We are particularly pleased with these outcomes as they were long-standing convictions, illustrated by our ownership of Nvidia and Novo Nordisk since the Fund's inception in 2019.

The launch of ChatGPT has brought significant attention to the entire artificial intelligence ecosystem. In the portfolio, many companies benefited from this trend, particularly those involved in AI infrastructure like Nvidia, a semiconductor manufacturer that experienced a remarkable 237% growth over the year. Additionally, companies offering AI related services such as cloud computing and cybersecurity, like Microsoft and Palo Alto, have also witnessed substantial gains of 52% and 102% respectively.

The other mega-trend we are benefiting from is the opportunity in drugs to treat obesity. Danish company Novo Nordisk (+50%) and US Eli Lilly (+61%) are best placed for this theme, as they dominate the fast-growing market of GLP-1 drugs. We see this as a trend likely to last for decades, and were massively invested into these 2 companies (it represented in average 12% of the Fund over the year). Our investments in these two companies largely compensated our large overweight in a lagging healthcare sector. Indeed, a large majority of healthcare stocks underperformed over the period, as evidenced by our portfolio holdings in Lonza, Thermo Fisher and Masimo.

Finally, the remaining portion of our portfolio exhibited a mixed performance. On a positive note, our long-term holdings, including SAP, L'Oréal, Assa Abloy and Kingspan, delivered strong results driven by robust fundamentals. Conversely, our defensive holdings, such as the consumer staples sector with companies like Colgate and Procter & Gamble, did not perform as well as expected when compared to the overall market.

Outlook 2024

After the strong performance of markets in 2023, we are more attentive than ever to where downside risks and opportunities may be. As we look ahead to 2024, the question arises whether the economy will experience a soft landing, as consensus currently expects, and whether companies achieve the strong earnings growth expectations in a slowing economy. We expect relative leadership to broaden and include more defensive-oriented names that have been underperformers this past year. We believe high quality, secular growers, with better than average visibility on sales and profits will perform well in an environment of falling inflation and interest rates, and generally weak economic activity indicators.

More specifically in the portfolio, we continue to favour the healthcare sector which remains the top sector in the fund. Despite the past two years of strong performance in the obesity theme, we believe Novo Nordisk and Eli Lilly will continue to thrive. Analyst forecasts have not fully accounted for the ongoing momentum in diabetes prescriptions and the significant increase in the supply of drugs for obesity, which will meet the growing demand in 2024. In addition to these names, we kept our positioning in sub-sectors that underperformed last year, such as life science tools and services providers like Lonza or suppliers such as Thermo Fisher. We also maintain core holdings in medical device companies Stryker and Intuitive Surgical, where the names have recovered from unjustified concerns relating to potentially lower demand due to obesity drugs reducing patient need for some surgeries.

In the other main sector, Technology, we proceed to some adjustment regarding 2023 performance. We maintain our large holding in Microsoft. With its core drivers of Microsoft 365 and Azure cloud computing platform performing well, and the potential upside revenue driver of their AI co-pilot for Office products which has recently launched, we believe the name is well placed in 2024 to deliver stable growth. In contrast, we have materially reduced our size in Nvidia and have added a position in chip competitor AMD who are well placed to take market share from Nvidia with their entry into GPUs. Elsewhere we also maintain holdings in business software providers SAP and Oracle where for several quarters now the core nature and utility of their productivity improving products have delivered resilient customer demand despite some economic uncertainty. Conversely, we have taken profits in some of the higher growth software names such as Salesforce.com, ServiceNow and Intuit, after strong performance in 2023.

Finally, in the rest of the portfolio , we increased our weighting in our staples holding P&G and Colgate. These companies lagged in 2023 despite the fact that operationally they have delivered as expected and are on course for stable high single digit profit growth for 2023. We believed they will keep this visibility and resilience as we head into 2024. Additionally, we have increased our exposure to Estee Lauder, a cosmetics company that has been adversely hit by their large exposure to the Chinese market. Nonetheless the quality of the brand remains very strong, and we anticipate an improvement in Asian markets from Q2 2024 onwards.

Source: Carmignac, 31/12/2023. Performance of the A EUR acc share class ISIN code: LU1966631001. 1Reference indicator: MSCI WORLD (USD, Reinvested net dividends). Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations. Performances are net of fees (excluding possible entrance fees charged by the distributor).

Carmignac Portfolio Grandchildren

A global, high-conviction equity fund for long-term investorsDiscover the fund page

Carmignac Portfolio Grandchildren A EUR Acc

ISIN: LU1966631001
Recommended minimum investment horizon
5 years
Risk indicator*
4/7
SFDR - Fund Classification**
Article 9

*Risk Scale from the KID (Key Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. **The Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 is a European regulation that requires asset managers to classify their funds as either 'Article 8' funds, which promote environmental and social characteristics, 'Article 9' funds, which make sustainable investments with measurable objectives, or 'Article 6' funds, which do not necessarily have a sustainability objective. For more information please refer to https://eur-lex.europa.eu/eli/reg/2019/2088/oj.

Main risks 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.

Fees

ISIN: LU1966631001
Entry costs
4,00% of the amount you pay in when entering this investment. This is the most you will be charged. Carmignac Gestion doesn't charge any entry fee. The person selling you the product will inform you of the actual charge.
Exit costs
We do not charge an exit fee for this product.
Management fees and other administrative or operating costs
1,70% of the value of your investment per year. This estimate is based on actual costs over the past year.
Performance fees
20,00% when the share class overperforms the Reference indicator during the performance period. It will be payable also in case the share class has overperformed the reference indicator but had a negative performance. Underperformance is clawed back for 5 years. The actual amount will vary depending on how well your investment performs. The aggregated cost estimation above includes the average over the last 5 years, or since the product creation if it is less than 5 years.
Transaction Cost
0,26% of the value of your investment per year. This is an estimate of the costs incurred when we buy and sell the investments underlying the product. The actual amount varies depending on the quantity we buy and sell.

Performance

ISIN: LU1966631001
Carmignac Portfolio Grandchildren15.520.328.4-24.223.0
Reference Indicator15.56.331.1-12.819.6
Carmignac Portfolio Grandchildren+ 3.8 %+ 12.1 %+ 13.1 %
Reference Indicator+ 8.6 %+ 12.6 %+ 13.5 %

Source: Carmignac at 31 Oct 2024.
​Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).

Related articles

[Background image] [CI] Blue sky and buildings
Global equities28 October 2024English

35 years in the global equity arena, many more ahead

1 minute(s) read
Find out more
Global equities16 March 2023English

Carmignac Portfolio Grandchildren awarded for its sustainable approach

2 minute(s) read
Find out more

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.

Morningstar Rating™ : © Morningstar, Inc. All Rights Reserved. The information contained herein: is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Access to the Funds may be subject to restrictions regarding certain persons or countries. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the material or availability of this material is prohibited. Persons in respect of whom such prohibitions apply must not access this material. Taxation depends on the situation of the individual. The Funds are not registered for retail distribution in Asia, in Japan, in North America, nor are they registered in South America. Carmignac Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Funds have not been registered under the US Securities Act of 1933. The Funds may not be offered or sold, directly or indirectly, for the benefit or on behalf of a «U.S. person», according to the definition of the US Regulation S and FATCA.
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, 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.

The Management Company can cease promotion in your country anytime.
Investors have access to a summary of their rights in English on the following links: UK ; Switzerland ; France ; Luxembourg ; Sweden.