Carmignac Sécurité: Letter from the Fund Managers
In the third quarter of 2024, Carmignac Sécurité posted a performance of +1.97%, while its reference indicator1 returned +2.16%.
What happened on the fixed income markets during the quarter?
The third quarter was a prolific one for the fixed income market, propelled by all its performance drivers, namely duration, credit spreads and carry. Carmignac Sécurité clearly benefited from this, thanks to its “barbell” strategy, which combines exposure to fixed-income markets (average duration around 2) and money markets (nearly 20% of assets under management) with an allocation to credit markets (around 2/3 of assets under management), while maintaining an average carry of over 4% annualized return. Since the beginning of the year, the fund's net performance has been 4.36%, compared with 2.52% for its reference indicator. At the same time, the fund's volatility has fallen significantly, to a 1-year level close to 1.5%.
“The time has come to adjust monetary policy”. These were the words of Jerome Powell on August 23, at the Federal Reserve's annual meeting in Jackson Hole. They follow three months in which core inflation has fallen below its 2% target. Above all, they follow a faster-than-expected rise in the sacrosanct US unemployment rate, from 3.4% to 4.3%. After 2 years of restrictive rates to combat high inflation, the Fed has changed its tune, now committed to “doing everything in its power to support a strong labor market”. Against this backdrop, the Federal Reserve made a thunderous entry into the rate-cutting cycle, cutting rates by 0.50%, prompting markets to anticipate a rapid return to the neutral rate - according to the Fed, around 3% - leading to a steepening of the US yield curve and a general decline in short rates in developed countries. The US 2-year rate thus fell by 1.10% over the quarter, compared with 0.60% for the 10-year rate.
European rates were no exception. The German 2-year rate lost almost 0.80%, compared with 0.40% for the 10-year rate. Although inflation in services remains stubbornly high due to the inertia of wage growth, overall inflation continues to fall and even dipped below 2% in September. And unlike the USA, where growth remains vigorous, the ECB has had to revise downwards the rebound potential of European growth, after 5 sluggish quarters. Leading indicators are showing pessimistic managers for the future, and German institutions have had to revise their growth forecast for 2024 to zero, after a negative 2023. Thus, the ECB has paved the way for an acceleration in rate cuts, from a quarterly pace to successive cuts, probably to the neutral rate of around 2%, with the risk, unlike the Fed, of having to do more rather than less, given lacklustre growth and declining fiscal support.
Credit margins have benefited fully from this cocktail of resilient growth, normalizing inflation, withdrawal of restrictive monetary policies and attractive absolute interest rates. Italy's 10-year yield is now 1.2% higher than Germany's, compared with 1.5% at the start of the quarter. Investment-grade corporates have a spread against Germany of 1.1%, versus 1.2% in June, and high-yield ratings of 3.6% versus 3.8%. France is one of the few exceptions to the tightening, due to its political and budgetary impasse, with no clear way out in the short to medium term. The Fund has very little exposure to this country, other than monetary, and is limited to specific companies.
Outlook & positioning
The environment is likely to remain very buoyant for Carmignac Sécurité, which still enjoys a very attractive yield to maturity of over 4%, close to its level at the start of the year. The emerging “soft landing” scenario is the one in which the portfolio is performing best, combining falling rates and resilient credit markets. Nevertheless, the final quarter of the year remains paved with pitfalls: an incandescent geopolitical context, uncertain and divisive US elections and the risk of execution by central banks, to name but a few threats... As a result, we are maintaining a “barbell” strategy in which almost two-thirds of the fund's assets are invested in corporate bonds with good ratings and short maturities. This is counterbalanced by a moderate duration close to 2, almost 20% exposure to money markets, credit protection via the iTraxx Xover index, and inflation strategies (via breakevens and real rates).
Carmignac Sécurité
Flexible, low duration solution to navigate European fixed income marketsDiscover the fund pageCarmignac Sécurité AW EUR Acc
- Recommended minimum investment horizon
- 2 years
- Risk indicator*
- 2/7
- 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
Fees
- Entry costs
- 1,00% 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
- 1,11% of the value of your investment per year. This estimate is based on actual costs over the past year.
- Performance fees
- There is no performance fee for this product.
- Transaction Cost
- 0,24% 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 Sécurité | 1.7 | 1.1 | 2.1 | 0.0 | -3.0 | 3.6 | 2.0 | 0.2 | -4.8 | 4.1 |
| Reference Indicator | 1.8 | 0.7 | 0.3 | -0.4 | -0.3 | 0.1 | -0.2 | -0.7 | -4.8 | 3.4 |
| Carmignac Sécurité | + 1.1 % | + 1.1 % | + 0.9 % |
| Reference Indicator | + 0.2 % | - 0.1 % | - 0.0 % |
Source: Carmignac at 31 Oct 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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