Carmignac Portfolio Human Xperience celebrates its three-year anniversary

We believe that companies that provide positive experiences for both their customers and their employees are better positioned to achieve superior returns over the longer term. Driven by these convictions, we have launched Carmignac Portfolio Human Xperience in 2021.

Carmignac Portfolio Human Xperience is a thematic fund that aims to have a positive contribution to society by investing in companies that stand out for their positive customer and employee experiences. ESG is at the heart of this strategy. In particular, we focus on the S dimension through an in-depth data analysis, which allows the Fund to be classified as Article 9 according to the SFDR regulation. To achieve this objective, we have developed our own proprietary database which relies on both external and internal data sources. Thus, it provides a comprehensive and objective view of a company using three different complementary types of data: survey results, company reports, and news flows.

In today's fast changing world, businesses are recognizing the need to prioritize the impact they have on society for the overall success and sustainability of their activity. As consumers become more socially conscious and demand ethical practices from companies, businesses that neglect extra-financial aspects, including the S segment, risk losing out on potential customers and damaging their long-term prospects. During the COVID-19 pandemic (Covid) era, we have witnessed the emergence of new consumption behaviours. The pandemic has amplified contradictory trends. On one hand, consumers and employees have put culture and values at the forefront of their importance list. On the other hand, we have witnessed an acceleration in consumption, particularly through e-commerce, reflecting the need for immediacy at the expense of quality. This is illustrated, for example, by the explosion of the gig economy¹ during the Covid, with a surge in demand accompanied by an increasing consumers’ level of requirement for faster delivery times, regardless of the working conditions of companies. At Carmignac, we believe that it is more viable in the long term for a company to focus on the quality of products and to pay attention to working conditions of employees.

We spend one third of our life at work⁴. We can therefore affirm that our working conditions, beyond impacting our quality of life, are crucial in terms of employee engagement and involvement. The post-Covid period has also highlighted the importance of well-being at work. Indeed, the phenomenon of the "great resignation"⁵ characterized this awareness of the true value of work and accentuated the desire to find meaning in it. Furthermore, it also illustrated the need of better working conditions, such as higher wages and a better consideration of hard works. Companies have therefore implemented measures to retain their talents. But we can also note that companies presenting a positive employee experience are most likely to attract new talents who are likely to stay in the long run. With the new legislation currently underway on the social aspect, it is now observed that human capital is becoming increasingly important.

These key figures demonstrate that investing in the S segment not only aligns businesses with societal values but also brings numerous benefits. By prioritizing employee well-being and fostering a positive work culture, businesses can enhance productivity, and attract top talent.

At Carmignac, in order to better understand this social axis and allow investors to access this theme, we have identified and selected relevant data, such as the best practices implemented by companies.

In recent years, new regulatory initiatives have been implemented to cover various social issues and protect and empower workers. The topics of human rights and due diligence in the supply chain have been particularly addressed through various measures. For example, in 2022, a law was enacted in the United States to prevent forced labour of Uighurs⁶. The same year, the European Union proposed to ban products derived from forced labour⁷. In 2017 and 2023, both France⁸ and Germany⁹ implemented due diligence in the supply chain regarding human rights, child labour, and forced labour. In terms of diversity and inclusion, efforts have also been made at various levels. For instance, in 2023, the EU rules on the gender pay gap were adopted by the European Parliament¹⁰.

Product safety, confidentiality of personal data, and respect for customers by the company are elements that we evaluate. Furthermore, customer loyalty costs less than acquiring new customers. Indeed, as marketing becomes increasingly expensive, a company sets itself apart from the competition by successfully maintaining a strong customer base. A study denotes that the acquisition costs of new customers had risen by 222% between 2014 and 2022¹¹.

Regarding employees' experience within a company, we assess their health and safety measures in place, as well as diversity and inclusion. We also evaluate employees’ engagement, company culture and leadership based on defined indicators, such as surveys results, news flow and internal data from the company itself. Employees who feel listened to, entrusted with responsibilities, and valued are more likely to exhibit lower absenteeism and lower employee turnover, which supports the profitability of the company. External research demonstrates the importance of employee engagement and the effect it may have on costs and revenues. According to the Center for American Progress, replacing a single employee can cost up to 20% of their annual salary¹². Dale Carnegie, a professional business training company, reports that companies with engaged employees outperform those with lower engagement levels by up to 202%¹³.

Within our Carmignac Portfolio Human Xperience fund, we focus on companies that are highly rated in terms of customer and employee experience.

Carmignac Portfolio Human Xperience is a unique strategy that allows our clients to access a theme that we believe is often overlooked by investors, even though it is becoming increasingly important. Through a differentiated approach, we aim to provide our clients with the financial potential of companies that focus on a positive customer experience, as well as employee satisfaction.