Fund News
Managing the Patrimoine strategy through the Covid-19 crisis
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This pandemic is a “black swan” meaning we cannot compare this situation to precedents, so we are not able to draw any instructive parallels.
The wave of the virus has kept shifting from the East to the West, with China appearing to be almost out of the woods. In Europe, we could see improvement in virus situation in a few weeks given confinement measures that have been taken; even if, the economic impact remains strong. In the US, the wave is now reaching several hot spots and as long as the virus propagation trajectory remains unchanged, and confinement measures worsen, the economic impact will be difficult to estimate.
More generally speaking, in our opinion, the real big problem for markets is the underlying context in which this demand shock created by the combat against the virus occurred. Indeed, the world has leveraged itself massively for 10 years creating some fragilities. This context explains why the Fed is trying to provide liquidity faster than the financial system is deleveraging, but it is finding it very challenging.
Our assumption is that Central Banks will provide the necessary liquidity; and Governments should manage to avoid a cascading effect of bankruptcies that would lead to a deep and lasting recession. On this front, it was reassuring that the ECB and the Fed, finally dug out their bazookas. But the coordination in fiscal policy especially at the European level is still very insufficient. So the risk of a bleaker scenario remains plausible.
Is a potential rebound expected? If technical rebounds can be seen on the back of oversold markets as well as fiscal and monetary announcements, we think it is too early for a trend reversal. The health situation is likely to deteriorate in US and markets don’t seem to have priced a quasi-full stall of the economy for several months, so cautiousness remains the key.
For the time being, we'll keep adopting a low-risk profile across the Patrimoine range:
Carmignac Patrimoine
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To manage risk, we have:
Reduced the risk across all asset classes by cutting the equity exposure and increasing the level of cash.
Implemented short positions on equity indexes to hedge both our equity and credit portfolios.
Reduced our non-core European and Emerging market debt risks.
Reduced currency risk.
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In our core positioning, we have:
Focused on companies with visible earnings growth prospects and stayed clear of those with the heaviest debt loads.
Favoured China equity exposure relatively to the rest of the world due to the virus trajectory.
Favoured sovereign debt in countries where Central Banks have the most leeway like the US.
Reinforced our cautious stance on credit as we may move from a liquidity crisis to a solvency crisis.
Carmignac Portfolio Patrimoine Europe
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To manage risk, we have:
Reduced the risk across all asset classes by cutting the equity exposure and increasing the level of cash.
Cut our peripheral bonds exposure, mainly Italy.
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In our core positioning, we have:
Unchanged equity portfolio still searching for long-term sustainable growth in each of our holdings, that look to play out over time.
Maintained a low long modified duration alongside a low risk credit portfolio.
Carmignac Portfolio Emerging Patrimoine
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To manage risk, we have:
- Reduced the risk across all asset classes by cutting the equity exposure and increasing the level of cash.
- Reinforced our euro, US dollar & yen exposures with very low emerging markets currency exposure.
- Used US treasuries exposure on a tactical basis.
- Implemented protection on emerging markets sovereign debt.
- Reduced the risk across all asset classes by cutting the equity exposure and increasing the level of cash.
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In our core positioning, we have:
Kept an equity portfolio focused on long-term convictions in non-cyclical growth stocks mainly in Asia and very low exposure to oil exporting countries.
Maintained a relatively low modified duration, with selective exposure to local /external debt.
Carmignac Patrimoine
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.
INTEREST RATE: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.
CREDIT: Credit risk is the risk that the issuer may default.
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.
The Fund presents a risk of loss of capital.
Carmignac Portfolio Patrimoine Europe
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.
INTEREST RATE: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.
CREDIT: Credit risk is the risk that the issuer may default.
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.
The Fund presents a risk of loss of capital.
Carmignac Portfolio Emerging Patrimoine
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.
INTEREST RATE: Interest rate risk results in a decline in the net asset value in the event of changes in interest rates.
CREDIT: Credit risk is the risk that the issuer may default.
EMERGING MARKETS: Operating conditions and supervision in "emerging" markets may deviate from the standards prevailing on the large international exchanges and have an impact on prices of listed instruments in which the Fund may invest.
The Fund presents a risk of loss of capital.