Carmignac Portfolio Emerging Discovery : Letter from the Fund Managers

Carmignac Portfolio Emerging Discovery1 returned +2.8% during the first quarter of 2023 versus +1,6% for its reference indicator2.

During the first quarter of 2023, the fund’s investments in Taiwan, Mexico and South Korea contributed positively to overall returns. The fund was also able to sell down legacy Russian holdings at a profit relative to the value they were written down to a year ago. While returns of the broader Indian market were negative in absolute terms, the fund’s holdings in India delivered good relative gains.

Performance explanation

This year, equity markets are being shaped by two contrasting forces. On one hand, we are seeing tailwinds from the reopening in China and continued growth, albeit at a slower pace than 2022, across much of the rest of our emerging markets universe. The interest rate cycle getting closer to its peak across many geographies is also helping equities. On the other hand, increasing signs of an economic slowdown in the US are keeping us on our toes. We remain focused on identifying businesses that have a combination of a long runway for growth ahead of them, sustainably profitable business models and management teams we can trust. We hope to use the volatility in the markets to buy more of these businesses at attractive valuations.

One of the businesses that we have gradually built a position in recent quarters is Policybazaar (PB Fintech). Policybazaar is India’s leading online insurance agent. India has a very low penetration of term life insurance and health insurance. Policybazaar started as a price comparison site allowing customers to compare offerings of various insurers. But over the years they have built capabilities to help customers complete the entire process of purchase of insurance online. This is particularly relevant for term life and health insurance where customers need advice and significant handholding in choosing the right product. Policybazaar has sometimes gone even further and identified products for which there was unmet demand and advised insurers to build such products and offer them on Policybazaar. We have tracked Policybazaar since the time they were a private company and have greatly come to respect their founders and management. There was a meaningful sell-off in the shares of Policybazaar towards the end of last year and early this year, which allowed us to build a position at very attractive prices.

Another area of continued interest for us has been electric vehicles (EV). Both China and South Korea have established themselves as leaders in EV battery supply chain. EV batteries are set for strong growth in the coming years given active policy support for EV adoption globally, especially in the US with generous subsidies announced under the ‘Inflation Reduction Act’. Our focus has been to identify high barrier-to-entry business models within the EV supply chain. The fund currently has investments in Chunbo and Daejoo Electronic Materials. There has recently been euphoria surrounding cathode makers in South Korea, but our preference has been for businesses with clear technology leadership who can sustain attractive margins and return-on-capital over the long term.

Outlook going forward

During the first quarter of 2023, we have added to the fund’s higher conviction holdings whenever the opportunity has arisen, we also have taken profits on some of our long-term holdings such as Varun Beverages. India remains an excellent market to find long term compounders, but we are also wary of high valuations at a time when many major economies around the world have exited the very-low-interest-rates regime of the previous decade. The fund continues to have a good mix of defensive holdings though investments in predictable return companies such as the Brazilian transmission utility Alupar, where growth is somewhat lower but even then, the guaranteed regulated returns are very attractive.

As we head into the second quarter of 2023, the fund’s focus on small and mid-caps in Emerging Markets continues to offer us a diversity of opportunities across themes in our major geographies – from leaders in export of services and resultant domestic consumption in India and ASEAN to goods export powerhouses of China and Vietnam and their domestic consumption; from advanced technology ecosystems in South Korea and Taiwan to economies enriched by critical commodities across Latin America, Middle East and Africa. We aim to continually strengthen the fund’s portfolio by taking advantage of opportunities offered by dislocations in any specific geography or theme.

1Performance of the A EUR acc share class ISIN code: LU0336083810. Past performance is not necessarily indicative of future performance. The return may increase or decrease as a result of currency fluctuations. Performances are net of fees (excluding possible entrance fees charged by the distributor). From 01/01/2013 the equity index reference indicators are calculated net dividends reinvested.
250% MSCI EM SmallCap (EUR) + 50% MSCI EM MidCap (EUR) (Reinvested net dividends rebalanced quarterly).
Sources: Carmignac Bloomberg, CLSA, BoAML Research, company data, 31/03/2023

Carmignac Portfolio Emerging Discovery

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Carmignac Portfolio Emerging Discovery A EUR Acc

ISIN: LU0336083810

Aanbevolen minimale beleggingstermijn

Laagste risico Hoogste risico

1 2 3 4 5 6 7
Voornaamste risico's van het Fonds

AANDELEN: Aandelenkoersschommelingen, waarvan de omvang afhangt van externe factoren, het kapitalisatieniveau van de markt en het volume van de verhandelde aandelen, kunnen het rendement van het Fonds beïnvloeden.

OPKOMENDE LANDEN: De netto-inventariswaarde van het compartiment kan sterk variëren vanwege de beleggingen in de markten van de opkomende landen, waar de koersschommelingen aanzienlijk kunnen zijn en waar de werking en de controle kunnen afwijken van de normen op de grote internationale beurzen.

WISSELKOERS: Het wisselkoersrisico hangt samen met de blootstelling, via directe beleggingen of het gebruik van valutatermijncontracten, aan andere valuta’s dan de waarderingsvaluta van het Fonds.

LIQUIDITEIT: De prijs waartegen het fonds zijn posities kan vereffenen, innemen of wijzigen, kan door tijdelijk gewijzigde marktomstandigheden worden beïnvloed.

Het fonds houdt een risico op kapitaalverlies in.

Carmignac Portfolio Emerging Discovery A EUR Acc

ISIN: LU0336083810
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (YTD)
Year to date
Carmignac Portfolio Emerging Discovery A EUR Acc +13.12 % +2.99 % +3.76 % +17.91 % -8.90 % +9.98 % -0.16 % +25.55 % -22.39 % +12.66 % +10.45 %
Referentie-indicator +12.98 % +0.19 % +6.67 % +18.14 % -11.64 % +14.39 % +5.35 % +21.27 % -11.67 % +14.93 % +2.75 %

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3 jaar 5 jaar 10 jaar
Carmignac Portfolio Emerging Discovery A EUR Acc +3.76 % +3.26 % +5.48 %
Referentie-indicator +4.82 % +6.86 % +6.53 %

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Bron: Carmignac op 28/03/2024

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