Back to school 2023 - Carmignac P. Emergents
YTD market & fund overview
In 2023, EM Equities were slightly up but they underperformed global equities, being dragged down by high interest rates and the selloff of Chinese markets amid US-China tensions & slower than expected recovery.
Against this backdrop, Carmignac P. Emergents managed to outperform its ref. indicator, benefiting from:
The solid rebound in our Asian tech stocks, amid growing interest for semiconductors and AI. Positive contributions from world’s leading chip maker Taiwan Semiconductor, South Korea’s Samsung Electronics and Japanese semiconductor equipment specialist Tokyo Electron.
Its increased exposure to Latin American countries. Mexico (9.2% of the Fund’s assets) was the best-performing large EM in 2023, thanks primarily to Nearshoring, benefitting to our Mexican and pan LatAm holdings (Grupo Banorte, MercadoLibre). Our Brazilian names also posted a positive contribution, thanks to the rebound of our infrastructure/ utilities company Equatorial Energia.
However, against a difficult period for Chinese markets, we suffered from the weakness of some of our Chinese consumer (JD.com, Anta Sports) and healthcare holdings (Wuxi Biologics).
TOP 5 YTD CONTRIBUTORS
- MINISO Cons. Disc. China
- NEW ORIENTAL Cons. Disc. China
- TAIWAN SEMICONDUCTOR Tech Taiwan
- GRUPO BANORTE Finance Mexico
- MERCADOLIBRE eCommerce Brazil
TOP 5 YTD DETRACTORS
- JD.COM Cons. Disc. China
- SEA LTD eCommerce Singapore
- ANTA SPORTS Cons. Disc. China
- WUXI BIOLOGICS Healthcare China
- ELETROBRAS Utilities Brazil
Throughout the year, we decided to maintain an overweight position in China as we believe the valuations of the quality companies that we have on the portfolio had become too extreme and disconnected from their good fundamentals.
This proved to be the right strategy as our top Chinese convictions posted solid returns YTD, ahead of consensus estimates (New Oriental, Beike, Miniso, JD), with Miniso and New Oriental enrolling among our best contributors YTD (see above).
We also benefited from our hedging strategy on the Chinese Yuan, implemented at the beginning of the year to protect our Chinese portfolio in a context of weakening RMB.
Notable portfolio moves
Reshuffling the Chinese portfolio
- Profit taking on top performing stocks (Miniso, New Oriental);
- Exits: ENN Energy and Alibaba;
- Additions: VIPSHOP and JD.com;
Increase of LatAm exposure
- Adding a new Mexican industrial real estate company, Inmobiliaria Vesta, a key beneficiary of Nearshoring.
Profit taking on Asian Tech/ Semi names:
- Selling of Tokyo Electron;
- Increased weighting of TSMC and Samsung, key beneficiaries of the AI revolution not being fully reflected in their stock prices.
Addition to India:
- Increase weighting of the Indian Bank Kotak Mahindra with appealing valuations after the Q1 sell off.
Outlook and positioning
For the remainder of the year, we maintain a constructive view on emerging markets, against backdrop of attractive valuations and the secular growth trends we see across EM (AI revolution, Nearshoring).
Concentrated portfolio: We have a concentrated portfolio with 35 holdings, and the ten biggest holdings make up 51% of the Fund’s assets, with particular attention paid to valuations. This high concentration reflects our desire to focus on those companies with our strongest conviction level and strongest fundamentals in this extremely uncertain market climate.
Increased focus on bottom-up fundamentals & valuations: In a rising rate environment, financial health and valuation continue to be primary considerations for us, as evidenced by our top 10 positions, which are made up of stocks for which we have a lot of confidence on valuation. We are convinced that our highly selective approach, coupled with the strength of our portfolio companies’ balance sheets, should enable us to outperform at a time when interest rate hikes by the main central banks are making things difficult for investors.
A strong focus on sustainability in line with our Article 9 mandate: our sustainability guidelines and objectives remain a primary focus for the Fund. Through each investment, we aim to contribute to UN Sustainable Development Goals (SDGs), while also achieving carbon emissions 50% below our reference indicator.
Performance drivers for months to come
Strong conviction in Asian Tech names: we continue to see a lot of value on the Asian tech and semiconductor names that are one of the main beneficiaries of the AI revolution that drove up the stock prices of US companies like Nvidia and Microsoft but isn’t yet reflected in Asian companies’ prices such as TSMC or Samsung Electronics despite their unique expertise & dominant market shares in their respective markets.
Increased allocation to Latin America: In order to take advantage of the Nearshoring trend in Mexico and the improving fundamentals in Brazil, we have stepped up our exposure to Latin America (19% of Funds net assets versus 10% for the ref. indicator). We are positioned on the industrial real estate sector in Mexico (Vesta) and key infrastructure and utilities companies in Brazil (Equatorial).
Selective opportunities in China: maintaining our decent allocation to the Chinese markets (37% of net assets), to take advantage of the growth potential of solid balance sheet consumer companies that are trading at prices that don’t fully reflect their underlying fundamentals and growth prospects.
In China, our approach is centered on bottom-up stock selection, focusing on company fundamentals and valuations.
Almost all the Chinese companies in our EM portfolios are leaders in their sector, with strong cash flow profile and solid balance sheet, benefiting from the large amount of cash they are able to deploy to boost their market share and solidify their market-leading position following the gradual normalization of the economy post-reopening, while their weaker competitors have exited the market or are struggling.
On the contrary, we try to avoid cyclical companies (banks, property developers, materials and energy companies) that seem vulnerable in the current environment.
Carmignac Portfolio Emergents
Grasping the most promising opportunities within the emerging universeDiscover the fund pageCarmignac Portfolio Emergents F EUR Acc
- 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
Performance
| Carmignac Portfolio Emergents | 1.7 | 19.8 | -18.2 | 25.5 | 44.9 | -10.3 | -14.3 | 9.8 | 5.5 | 3.6 |
| Reference Indicator | 14.5 | 20.6 | -10.3 | 20.6 | 8.5 | 4.9 | -14.9 | 6.1 | 14.7 | 1.8 |
| Carmignac Portfolio Emergents | + 3.9 % | + 6.5 % | + 4.4 % |
| Reference Indicator | + 3.1 % | + 5.4 % | + 4.3 % |
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: MSCI EM NR index
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