How the Carmignac Portfolio Unconstrained Global Bond team's unconstrained approach assists in finding value on certain fringes of the market

Hardeep  Tawakley
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Charles Zerah, Rose Ouahba, Pierre Verle
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Charles Zerah, Rose Ouahba, Pierre Verle

Insight into the Carmignac Portfolio Unconstrained Global Bond strategy

Where are the best opportunities in global bonds today?

For several months, we have felt that due to a combination of historically low absolute yields, a likely pick-up in global inflation, and political risks in Europe, the bond markets in developed countries have little to offer us. They are suggesting that investors should give portfolios a very cautious level of modified duration in those geographies.

Nevertheless, opportunities can still be found within international bond markets. Indeed, we have made emerging market sovereign debt and commodity credit key components of our portfolio so as to reap the benefits of the emerging world's economic vibrancy. Furthermore, we maintain an allocation to subordinated debt in the European bank credit segment and European CLOs.

The challenge of investing in bonds in today's low yielding environment continues to plague investors; how do you combat this challenge?

Indeed, there is no doubt that some parts of the market are expensive as hyper-active central banks with unconventional policies have forced investors, via the portfolio rebalance channel, to make greater investment risks than they otherwise would have done. This has reduced risk premia across all asset classes. Nevertheless, our unconstrained approach allows us to find value on certain fringes of the market. We are convinced that a flexible and opportunistic-based strategy with active risk management is essential to find the best risk-adjusted opportunities in order to outperform.

The fund has a strong allocation to emerging market debt, what are the drivers for this allocation?

Emerging market debt still appears to offer interesting opportunities, supported by Chinese macro-stabilisation, commodity price rebounds, improving current account balances of some emerging countries, and attractive yields versus developed countries. However, selectivity is key in an environment that continues to be volatile. Evaluating each country and corporate risks and opportunity set is fundamental to singling out the best stories in this asset class."

Moreover, we believe that commodity exporting countries should continue to offer attractive risk premiums in comparison with manufacturing countries in emerging markets.

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Carmignac Portfolio Global Bond A EUR Acc (ISIN: LU0336083497) is a share class of the sub-fund of the Carmignac Portfolio Sicav. Ongoing charges: 1,20%.. The fund has other shares in other currencies. This document is intended for professional clients.

Promotional material - Source: Carmignac at 31/03/2017. This document does not constitute a subscription offer, nor does it constitute investment advice. Access to the Fund may be subject to restrictions with regard to certain persons or countries. The Fund is not registered in North America, nor in South America. The Fund has not been registered under the US Securities Act of 1933. The Fund may not be offered or sold, directly or indirectly, for the benefit or on behalf of a U.S. person, according to the definition of the US Regulation S and/or FATCA. 7.. The Fund presents a risk of loss of capital. The risks, fees and ongoing charges are described in the KIID (Key Investor Information Document). The Fund's prospectus, KIIDs, NAV and annual reports are available at www.carmignac. com, or upon request to the Management Company, or for the French Funds, at the offices of the Facilities Agent at BNP PARIBAS SECURITIES SERVICES, operating through its branch in London: 55 Moorgate, London EC2R. This material was prepared by Carmignac Gestion and/or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch (Registered in England and Wales with number FC031103, CSSF agreement of (10/06/2013). The KIID must be made available to the subscriber prior to subscription.

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