Carmignac Portfolio Climate Transition: Letter from the Fund Manager
![[Management Team] [Author] Wiskirski Michel](https://carmignac.imgix.net/uploads/NextImage/0001/18/%5BManagement-Team%5D-Wiskirski-Michel.png?auto=format%2Ccompress&fit=fill&w=3840)
During the second quarter of 2023, the return of Carmignac Portfolio Climate Transition (A share class) was +2.04%, against its reference indicator, which rose 5.73%. The Fund has posted a performance of +7.13% year to date, versus its reference indicator +11.45%.
Quarterly Performance Review
The macroeconomic backdrop was dominated by a large number of divergences, both geographic and sectoral, accompanied by a global disinflationary trend.
The United States came through the quarter in fine fettle, with growth slowing but resilient, and inflation receding. While the US manufacturing sector clearly showed signs of weakness and even fragility, the service sector held up admirably. The very good financial health of households, characterized by a very substantial savings reserve accumulated during the pandemic period, was one of the main driving forces behind the good health of the US service sector. Backed by a robust US job market (with a historically high ratio of job vacancies to job seekers) and sharply rising wages, household consumption of services surprised on the upside. This economic resilience was accompanied by a reduction in inflationary pressures, contributing to an improvement in the real purchasing power of economic agents. This resilience led to a rise in US nominal and real interest rates. This was accompanied by a very good performance by US equities, particularly technology stocks, as evidenced by the performance of some of our holdings like Ansys and Autodesk. The quarter was also marked by the emergence of a new theme: artificial intelligence. While we are still in the early stages of its application in the real economy, artificial intelligence will undoubtedly shake up many sectors. The energy transition is set to benefit fully. Better management of power grids, greater efficiency in green energy generation, lower costs and greater predictability of supply and demand are just some of the benefits expected from artificial intelligence. At the heart of this new technological revolution is the semiconductor sector (graphics cards, memory, etc.), which has benefited from widespread initial interest, as witnessed by the rise in some of our stocks over the quarter (Taiwan Semiconductors Manufacturing, Samsung).
While the United States showed surprising economic health, the same cannot be said of the Chinese and European economies. The long-awaited reopening of the Chinese economy, following years of restrictions due to the pandemic, failed to live up to expectations. Household consumption of both goods and services has not really rebounded, except in very timid proportions. China's manufacturing sector also remained lackluster, benefiting neither from a rebound in external demand nor from reinvigorated domestic demand. Moreover, the real estate sector remains in dire straits (overcapacity, insufficient demand, sectoral over indebtedness) and continues to weigh on the wider economy, no longer contributing to its growth - quite the contrary. This disappointing reopening, to put it mildly, weighed on several commodities during the quarter, as evidenced by the decline in oil, as well as a good number of base metals such as copper and iron ore.
The European economy, for its part, also showed a lackluster level of activity. While the fall in commodity prices, particularly energy, was welcome (European gas prices fell over the quarter), the European manufacturing sector was likely in contraction during the quarter, given the weakness of business survey indicators (German PMI close to 40 and new orders below the 40 mark). While domestic demand failed to materialize, Chinese weakness exacerbated the deterioration in our European industries. In view of these sluggish economic indicators, we reduced some of our holdings, such as Schneider Electric, which had appreciated sharply since the start of the year. European stocks in the renewable energy sector suffered from further setbacks at Siemens Energy's wind power subsidiary. These weighed on the performance of some of our holdings, such as Vestas and Orsted, which we decided to increase in view of the idiosyncratic nature of the problems mentioned by Siemens Energy.
How is the fund positioned?
The fund maintains a strong exposure to renewable energy generators both on the other side of the Atlantic and on the old continent, as evidenced by our large holdings in Nextera Energy, RWE and SSE. These stocks should continue to benefit gradually from accelerated capital deployment against the backdrop of the Inflation Reduction Act. In addition, our broad exposure to the power semiconductor value chain remains fully relevant, given the increasingly intensive use of power semiconductors in the broader energy transition. Finally, we retain a significant industrial allocation, notably in recycling (Waste Management) and water treatment (Ecolab, Danaher).
What is our outlook for the coming months?
While a number of uncertainties remain, notably in terms of inflation and global growth, powerful green public policies such as the Inflation Reduction Act in the US attracted a great deal of capital spending at the start of the year and should support the investment cycle across the Atlantic and beyond. In this respect, we have seen numerous announcements in the field of batteries for electric vehicles from players such as LG Chem, as well as large-scale renewable energy projects which should continue to benefit our green infrastructure stocks such as Mastec.
Carmignac Portfolio Climate Transition
A sustainable equity fund acting for climate change mitigationDiscover the fund pageCarmignac Portfolio Climate Transition A EUR Acc
- Recommended minimum investment horizon
- 5 years
- Risk indicator*
- 5/7
- 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 Climate Transition | 7.9 | -16.2 | 21.7 | 5.5 | -17.7 | 14.8 | 4.5 | 10.4 | -15.1 | 1.8 |
| Reference Indicator | -2.2 | -19.7 | 41.7 | 5.1 | -9.6 | 18.8 | -11.1 | 27.5 | -13.0 | 18.1 |
| Carmignac Portfolio Climate Transition | - 3.4 % | + 2.1 % | + 1.0 % |
| Reference Indicator | + 10.0 % | + 9.0 % | + 6.5 % |
Source: Carmignac at Nov 29, 2024.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Related articles
Marketing communication. Please refer to the KID/KIID, prospectus of the fund before making any final investment decisions. This document is intended for professional clients.
This material may not be reproduced, in whole or in part, without prior authorisation from the Management Company. This material does not constitute a subscription offer, nor does it constitute investment advice. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. This material has been provided to you for informational purposes only and may not be relied upon by you in evaluating the merits of investing in any securities or interests referred to herein or for any other purposes. The information contained in this material may be partial information and may be modified without prior notice. They are expressed as of the date of writing and are derived from proprietary and non-proprietary sources deemed by Carmignac to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Carmignac, its officers, employees or agents.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor). The return may increase or decrease as a result of currency fluctuations, for the shares which are not currency-hedged.
Reference to certain securities and financial instruments is for illustrative purposes to highlight stocks that are or have been included in the portfolios of funds in the Carmignac range. This is not intended to promote direct investment in those instruments, nor does it constitute investment advice. The Management Company is not subject to prohibition on trading in these instruments prior to issuing any communication. The portfolios of Carmignac funds may change without previous notice. The reference to a ranking or prize, is no guarantee of the future results of the UCIS or the manager.
Morningstar Rating™ : © Morningstar, Inc. All Rights Reserved. The information contained herein: is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Access to the Funds may be subject to restrictions regarding certain persons or countries. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the material or availability of this material is prohibited. Persons in respect of whom such prohibitions apply must not access this material. Taxation depends on the situation of the individual. The Funds are not registered for retail distribution in Asia, in Japan, in North America, nor are they registered in South America. Carmignac Funds are registered in Singapore as restricted foreign scheme (for professional clients only). The Funds have not been registered under the US Securities Act of 1933. The Funds may not be offered or sold, directly or indirectly, for the benefit or on behalf of a «U.S. person», according to the definition of the US Regulation S and FATCA.
The risks, fees and ongoing charges are described in the KID (Key Information Document). The KID must be made available to the subscriber prior to subscription. The subscriber must read the KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Funds present a risk of loss of capital.
The Funds’ prospectus, KIDs, NAVs and annual reports are available at www.carmignac.com, or upon request to the Management Carmignac Portfolio refers to the sub-funds of Carmignac Portfolio SICAV, an investment company under Luxembourg law, conforming to the UCITS Directive. The French investment funds (fonds communs de placement or FCP) are common funds in contractual form conforming to the UCITS or AIFM Directive under French law.
In France, Luxembourg, Sweden: The risks, fees and ongoing charges are described in the KID (Key Information Document). The KID must be made available to the subscriber prior to subscription. The subscriber must read the KID. Investors may lose some or all their capital, as the capital in the funds are not guaranteed. The Funds present a risk of loss of capital. The Funds’ prospectus, KIDs, NAV and annual reports are available at www.carmignac.com, or upon request to the Management.
In the United Kingdom: the Funds’ respective prospectuses, KIIDs and annual reports are available at www.carmignac.co.uk, or upon request to the Management Company, or for the French Funds, at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R. This document was prepared by Carmignac Gestion, Carmignac Gestion Luxembourg or Carmignac UK Ltd. FP Carmignac ICVC (the “Company”) is an Investment Company with variable capital incorporated in England and Wales under registered number 839620 and is authorised by the FCA with effect from 4 April 2019 and launched on 15 May 2019. FundRock Partners Limited is the Authorised Corporate Director (the “ACD”) of the Company and is authorised and regulated by the FCA. Registered Office: Hamilton Centre, Rodney Way, Chelmsford, Essex, CM1 3BY, UK; Registered in England and Wales with number 4162989. Carmignac Gestion Luxembourg SA has been appointed as the Investment Manager and distributor in respect of the Company. Carmignac UK Ltd (Registered in England and Wales with number 14162894) has been appointed as a sub-Investment Manager of the Company and is authorised and regulated by the Financial Conduct Authority with FRN:984288.
In Switzerland: the prospectus, KIDs and annual report are available at www.carmignac.ch, or through our representative in Switzerland, CACEIS (Switzerland), S.A., Route de Signy 35, CH-1260 Nyon. The paying agent is CACEIS Bank, Montrouge, Nyon Branch / Switzerland, Route de Signy 35, 1260 Nyon.
The Management Company can cease promotion in your country anytime.
Investors have access to a summary of their rights in English on the following links: UK ; Switzerland ; France ; Luxembourg ; Sweden.