Back to school 2023 - Carmignac P. EM Debt
What about emerging markets ?
In EM fixed income, despite improving fundamentals yields and spread are attractive. Economic conditions remain fragile overall, but growth trends should prove more resilient relative to developed economies.
As inflation in EM has been relatively well behaved and continue to slow down, some EM banks have already started to lower their rates (Brazil, Hungary). Several are on the brink of a rate cut cycle likely to start in H2 2023, continuing well into 2024.
Signs of slowdowns in the US economy should be negative for the USD and thus help EM FX in EM regions to perform.
In China, disappointing reopening to linger. Indeed, the country is faced with a more difficult international environment due to the desire to many nations to regain industrial sovereignty and the United States to hinder Chinese development. Investors grew more pessimistic about the country’s economic outlook.
The positive trend on commodities, should also be supportive for emerging markets.
2023 Performance Contribution
- Since the beginning of the year, the portfolio has mainly benefited from its exposure to external and local sovereign debt, in the EMEA (Hungary, Czechia) and LATAM regions (Brazil).
- The active management of our selection of EM currencies strongly supported the Fund's performance, mainly driven by our LATAM and EMEA positions.
- Our exposure to local Mexican and Polish debt has so far had a negative impact on the Fund's YTD performance due to the widening of their rates.
Outlook & Positioning
We remain focused on duration with the view that a recession would force DM central banks to cut rates and thus enable further cuts in the EM world. The fund’s modified duration is now close to 636 basis points and has an average rating of BBB.
In local rates, we are ready to re-engage in countries like Brazil and Hungary, which were among the most advanced in their rate hike cycle, once the FED or ECB have paused and EM central banks can accelerate their cutting cycles.
In external debt, we continue to favour manufacturing countries that will benefit in the long term from the “nearshoring” phenomenon, i.e. the potential repatriation of production chains to closer and more stable countries (Romania, Poland, Mexico, etc.).
In FX, Although we have reduced our exposure to emerging currencies, we continue to favour a selection of currencies on a tactical/opportunist basis, such as the Brazilian real, the Mexican peso and the Thai baht. The correction on FX markets over the summer are a new source of tactical opportunities (BRL, MXN, CLP...).
Carmignac P. EM Debt
Exploit fixed income opportunities across the entire emerging universeDiscover the fund pageCarmignac Portfolio EM Debt A EUR Acc
- Recommended minimum investment horizon
- 3 years
- Risk indicator*
- 3/7
- SFDR - Fund Classification**
- Article 8
*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
Performance
| Carmignac Portfolio EM Debt | 0.8 | -10.5 | 28.1 | 9.8 | 3.2 | -9.4 | 14.3 | 3.7 | 2.7 |
| Reference Indicator | 0.4 | -1.5 | 15.6 | -5.8 | -1.8 | -5.9 | 8.9 | 4.4 | 2.5 |
| Carmignac Portfolio EM Debt | + 7.0 % | + 4.6 % | + 5.0 % |
| Reference Indicator | + 4.5 % | + 0.8 % | + 2.0 % |
Source: Carmignac at Feb 28, 2025.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Reference Indicator: 50% JPM GBI-EM Global Diversified Composite index + 50% JPM EMBI Global Diversified Hedged index
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