Carmignac Portfolio Grandchildren: Letter from the Fund Managers
Over the third quarter, Carmignac Portfolio Grandchildren achieved a positive return of +0.86%, although it underperformed its reference indicator, which posted a gain of +2.14%. This resulted in a year-to-date performance of +18.95% for the fund, compared to +17.64% for the reference indicator.
Market environment
The third quarter of 2024 concluded with positive returns despite several episodes of market volatility. In early August, stocks took a hit due to weaker U.S. economic data, an interest rate hike from the Bank of Japan, and thin summer liquidity. However, the much-anticipated commencement of the Federal Reserve’s rate-cutting cycle in September, along with a less aggressive stance from Japanese policymakers and new stimulus measures in China, alleviated investor concerns and fuelled a strong stock market rally towards the end of the quarter. This rally was also bolstered by strong earnings growth, continued positive economic growth in the US, and declining interest rates.
In more detail, the third quarter marked a shift in equity market leadership, with performance broadening beyond the mega-cap technology leaders. For example, the technology sector underperformed the S&P 500 by its widest margin since the second quarter of 2016. Instead, bond proxy sectors like Utilities and Real Estate, emerged as top performers.
How did we fare in this context?
The fund's defensive positioning allowed it to navigate this period with less volatility compared to the market. However, we did not participate in the September rally that followed the Federal Reserve's 50 basis points cut and the announcement of Chinese stimulus measures.
Reflecting broader market trends, the technology sector was the main detractor for the quarter, with notable underperformers including Microsoft, Adobe, and ASML. Nevertheless, our management of semiconductor exposure throughout the quarter helped mitigate some of this underperformance. Although Nvidia posted a negative quarterly performance, it contributed positively to our overall results due to our active management of its exposure. At the end of May, we decided to reduce our exposure to Nvidia (and ASML) as we believed the expectations were too challenging to meet. After reducing our exposure to 1.5% over the summer, we decided to increase it again in mid-September following a 25% drop in stock price. Additionally, in the technology sector, software giants SAP and Oracle reported strong quarterly results, particularly in the cloud segment, and ended the quarter with positive performance.
The healthcare sector remains one of the largest components of our fund, but this quarter we observed mixed results from our main investments. Life sciences companies like Lonza and Thermo Fisher performed well, but Novo Nordisk's stock dropped by over 20%. The company had mixed second-quarter results due to ongoing supply issues and higher-than-expected price declines. Although we expect supply to increase and for Novo Nordisk, along with competitor Eli Lilly, to dominate the obesity market, new competitors and different types of drugs are creating uncertainty in our medium-term forecasts. Additionally, drug pricing is under increased scrutiny and may not develop favourably. Considering these trends and the risk associated with an upcoming drug trial in November, Novo Nordisk's stock fell, impacting our fund's performance. Consequently, we have slightly reduced our investment in Novo Nordisk to manage these risks, but we still believe in its long-term potential.
Finally, our strategic convictions in the financial sector, which notably exclude traditional banks, have delivered notable performance over the quarter. Leading the charge were S&P Global and Intercontinental Exchange, emerging as the top contributors to the Fund. Given the year-over-year performance of these names, we have prudently taken some profits and slightly reduced our exposure to these holdings. This approach ensures we continue to maximize returns while maintaining a balanced and forward-looking portfolio.
Outlook
In alignment with our macroeconomic views, we continue to adopt a prudent approach, favouring high-quality defensive companies amidst the global economic slowdown. However, we have made some adjustments within the portfolio. Firstly, as previously mentioned, we have slightly increased our exposure to technology stocks that have underperformed in recent months, particularly in the semiconductor sector. These increases were funded by taking profits from companies that have performed well over the past 12 months, such as Procter & Gamble, Colgate Palmolive, and S&P Global. Lastly, we also capitalized on the rebound in discretionary consumer stocks following recent announcements from China to sell our remaining stake in Estée Lauder.
Carmignac Portfolio Grandchildren
An intergenerational Fund focused on quality, sustainable companiesDiscover the fund pageCarmignac Portfolio Grandchildren A EUR Acc
- Recommended minimum investment horizon
- 5 years
- Risk indicator*
- 5/7
- 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
Fees
- 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
| Carmignac Portfolio Grandchildren | 15.5 | 20.3 | 28.4 | -24.2 | 23.0 |
| Reference Indicator | 15.5 | 6.3 | 31.1 | -12.8 | 19.6 |
| Carmignac Portfolio Grandchildren | + 6.7 % | + 12.6 % | + 13.6 % |
| Reference Indicator | + 10.5 % | + 12.5 % | + 13.6 % |
Source: Carmignac at 30 Sep 2024.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
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