The euro-share class of the Carmignac Portfolio Global Bond was launched in December 2007 and has roughly €528m (£379m) in assets under management.
The aim of the offshore fund, which has more recently launched sterling share classes, is to beat its reference indicator – the JPMorgan GBI Global index – across a minimum two-year investment horizon by focusing on “maximising performance in diverse market conditions through an opportunistic and flexible approach”.
Manager Charles Zerah says that in order to achieve this he relies on three primary pillars: a global approach, a flexible stance and an active management towards fixed income and currency investments. He explains: “Whether in terms of geographic region, credit sector or bond instruments, we aim to seize every opportunity to take full advantage of government and corporate debt markets worldwide. The fund also implements currency strategies, both in developed and emerging markets, in order to harness their appreciation potential.”
The team adopts a non-benchmarked, conviction-driven investment style that is combined with an active style of management, including “constant monitoring of the universe to bring about a change in rapid fashion when necessary”.
Mr Zerah says: “We feel this highly flexible and extremely active approach is a very good fit for all macroeconomic conditions. The wide modified duration range, spanning -4 to +10, enables us to benefit from both falling and rising interest rate periods. Furthermore, the fund has the freedom to apply long and short strategies on the currency markets. This helps us implement our strongest convictions across bond and currency markets.”
The fund’s A-euro accumulation share class sits at a risk-reward level of four out of seven, with ongoing charges of 1.19 per cent, its key investor information document shows.
In performance terms, the fund’s F-sterling, accumulation hedged share class has delivered a positive 33.52 per cent return since its launch in December 2010 to April 22 2015, compared with the Investment Association Global Bond sector average of 14.35 per cent, data from FE Analytics shows. In addition, this share class has outperformed the sector average across one and three years, as well as in the past three and six months.
The manager notes that in the past quarter he has carried out some profit taking as the portfolio benefited from European Central Bank (ECB) action. He explains: “We started the quarter with a significant allocation to peripheral [European] sovereign bonds, which benefited from the quantitative easing programme and generally accommodative stance of the ECB. Taking advantage of the sharp fall in yields, the allocation was reduced from 55 per cent to roughly 25 per cent.
“Cash was deployed on UK sovereign bonds, where our conviction is justified by the extremely low inflation numbers, as well as a much more dovish central bank that appears to have postponed a rate rise in the face of relatively sluggish growth and stronger sterling. On the currency front, the fund’s bias to the US dollar, which has been a material position over the past year, has contributed significantly to performance.”
Mr Zerah points out the substantial appreciation of the greenback meant profits were also taken on this position. He explains: “We took advantage of the relatively stable yen/euro position [which had not appreciated to the extent of the US dollar] to add a long position on the Japanese currency versus the euro. This also serves as a safe haven asset in the face of uncertainty over the situation in Greece, which could lead to the weakening of the euro.”
While he attributed the outperformance to the “flexible and non-benchmarked approach”, he acknowledges the allocation to Greek sovereign bonds “was detrimental” in the quarter. But he adds: “The rest of the peripheral sovereigns have been well protected from this particular event by the actions of Mario Draghi, and this allocation more than compensated for the Greek weakness.”
Looking ahead, Mr Zerah notes in the sovereign space he sees value in core developed countries such as the UK, New Zealand and Sweden, where central banks have been accommodative and inflation expectations are at very low levels.
EXPERT VIEW
Rob Morgan, pensions and investment analyst, Charles Stanley Direct
Carmignac is increasing its presence in the UK and this fund now has a five-year record. It is flexible and opportunistic, moving freely across the whole spectrum of the market, from government debt to high yield. Charles Zerah can move the portfolio around quite quickly – for instance, recently dialling back US dollar exposure significantly. In theory, the fund could offer some stability in more difficult times for bond markets if he makes the correct calls. I would prefer to see a ‘through the cycle’ track record that includes more testing times, but it is a go-anywhere bond fund to keep an eye on.
