Markov Processes International

Carmignac Patrimoine: Defensive Strategy Pays Off

Carmignac Patrimoine, the €24 billion flagship fund of French manager Carmignac Gestion, is back in the spotlight due to its good performance this summer. Despite the turbulence in European financial market, the fund rose 2.56% while its benchmark (50% MSCI AC World+50% Citi WGBI) lost -3.19% from June to August this year. Our cumulative return chart below depicts the fund’s daily performance through this year. As shown, before July, the fund lagged both its peers and benchmarks. It staged a turnaround afterwards and now it outperforms its benchmark and is back to the top quartile.

We were interested to know whether there were any investment style changes that resulted in the fund’s recent good performance. Following our previous research paper (“Uncovering the Dynamics of Carmignac Patrimoine”), we ran an updated analysis of the fund using MPI’s proprietary Dynamic Style Analysis (DSA) model in our MPI Stylus Pro software. In figure below we show the fund’s exposures (in excess of the benchmark) vs. its performance relative to the benchmark (“Excess” dots).

According to the chart above, the fund continues to invest in gold (S&P GSCI Gold), fixed income (U.S. 3M LIBOR) and buys put contracts (short position in CBOE S&P 500 PutWrite) as a hedging tool. In the first half of the year these defensive positions resulted in significant underperformance against the benchmark; however, the same exposures staged a dramatic comeback for Carmignac Patrimoine in the recent months.

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