Carmignac Portfolio Emerging Patrimoine

The main announcement of the month came from the German parliament, which adopted a reform of its debt brake policy in order to increase its military spending while validating the creation of a 500 billion euro infrastructure fund.

In the United States, the statistics have been mixed, with disappointment over the leading indicators, which reflect less dynamic growth prospects and more vigorous inflation.

On the other hand, US economic statistics remain robust, with strong household and business consumption ahead of the implementation of tariffs.

The change in German fiscal policy doctrine resulted in a massive rate shock, as illustrated by the +33bp rise in the German 10-year rate, unlike its US counterpart, which remained stable in view of the uncertainties weighing on growth.

On the emerging markets front, both equity and fixed income markets declined, with credit spreads widening.

On the currency front, the euro appreciated strongly against the dollar, with the market anticipating a negative impact of tariffs on US growth, resulting in a favourable economic growth differential for Europe. The weakness of the dollar benefited certain emerging currencies.

Over the month, the fund delivered a negative performance, slightly below its benchmark.

Over the period, we suffered from the decline in our fixed income and equity investments.

In fixed income, we were impacted by our positions in local rates in Eastern European countries (Hungary, Czech Republic).

Our exposure to credit made a negative contribution, mainly impacted by the widening of credit spreads on our selection of emerging external debt (in hard currencies) such as Ukraine, Ecuador and Egypt. This negative impact was only partially offset by the protections we put in place to reduce our exposure to this market.

In equities, we suffered from the decline of our Asian stocks, particularly Taiwanese (TSMC, Elite), Malaysian (IHH Healthcare) and Chinese (Beike).

Finally, on the currency front, the strong rise of the euro had a negative impact on our exposure to the US dollar, even though we maintained a cautious exposure throughout the month, as well as on our long positions on the Colombian peso and the Hong Kong dollar.

Despite the uncertainties related to D. Trump's policies, we remain constructive on emerging assets, believing that current valuations reflect a pessimistic scenario. Moreover, emerging markets are benefiting from the uncertainty in the United States: Trump's policies seem to have the opposite effect, benefiting to emerging markets.

In a context characterised by uncertainty regarding customs tariffs, European defence budgets and geopolitical issues, and increasingly tense valuations in certain markets, we expect the main central banks of developed and emerging countries to gradually continue their monetary easing. We are therefore maintaining a relatively high level of modified duration (around 500 basis points).

On rates, we favour emerging central banks that are lagging the cycle, such as Brazil, which also benefits from high real rates and an allocation to some Eastern European countries. We also have positions on real rates in the US, as economic data in a context of tariff imposition point to a slowing economy.

On credit, we see opportunities mostly among high yield issuers such as the Ivory Coast and Colombia, which presents an attractive carry source. On the other hand, we are cautious due to high valuations and maintain a significant level of hedging on the iTraxx Xover to protect the portfolio from the risk of widening spreads.

We remain constructive on China, given the change in perception. Technological progress, particularly in AI and productivity, should provide further stimulus to the economy. This is why we are maintaining our equity investments in China.

We are keeping a significant allocation to India, where the long-term outlook remains promising (strong growth, political stability) despite the recent weakness. Our trip to India confirmed the country's promising outlook and the recent correction offers us some interesting entry points. We took advantage of this correction to increase our exposure to India by strengthening our positions in the e-commerce, tech and insurance sectors. Finally, we remain constructive on our Latin American portfolio, where valuations remain attractive.

In terms of currencies, we are maintaining a significant exposure to the euro. On the contrary, we have a relatively low allocation to the US dollar and limited exposure to emerging market currencies. Our currency selection includes Latin American currencies (BRL, CLP) and Eastern European currencies (PLN, CZK, HUF).