Flexibility and risk management are the keys to investing today

Rose Wahba, David Alder and Keith Ney explain how they manage the Carmignac Patrimoine fund in today’s very challenging environment.

Russia’s invasion of Ukraine, Covid-related containment measures in China, rising prices, global economic slowdown… The context seems complex. How do you deal with such a situation?

Rose Wahba: The clouds are starting to gather. The horizon is darkening because financial markets are now threatened by two main problems: the risk of recession and the risk of inflation. However, long before the Russian invasion or any new imprisonment in China, our analyzes and our forecasts already anticipated 2022 slower economic growth and more robust inflation than expected. The war in Ukraine and the lockdown in China are reinforcing these economic trends.

David Alder: If March was already a difficult month, then April was a terrible month for investors. In the United States, some stocks1 had their worst month since October 2018. Despite good fundamentals – the vast majority of companies posted results that beat expectations – financial markets are still driven by macroeconomic factors such as inflation. In this context, we are increasingly cautious in our valuations and maintain low exposure to equity markets.

Carmignac - Keith NeyKit Ney: There really is no safe place for investors because apart from stocks, bond markets there was also a sharp decline in March and April. Clearly, flexibility and risk management are key to investing in the current environment of slow growth and high inflation. This context has led us to invest in companies that are less or less affected by economic fluctuations or offer good visibility into their performance. We also kept a high level of cash to be able to seize opportunities.

Three of you have been running Carmignac Patrimoine for a year now. How is it an asset in the current context?

ORA: As there are three of us, we need to be even more disciplined in our approach, which is a key element of Carmignac’s investment process. It also forces us to keep an open mind about new opportunities and constantly check to see if our investment scenarios are still valid.

K.N.A: I agree with Rose. Combining our skills and analysis helps us find different ways to invest in the topics we choose. We spend a lot of time thinking about how the various parts of our Foundation fit together. This allows us to manage the portfolio with a global and consistent vision. This organization reflects our desire to offer our clients the best in terms of flexibility, portfolio building and risk management, which are the main characteristics of the Patrimoine range.

DO: I would say that we complement each other perfectly. But it’s not just a trio, it’s a whole team of Carmignac analysts and in-house experts who give us a 360-degree view of investment opportunities. It is a team effort to achieve our main goal: to manage our clients’ savings for the long term.

What investment philosophy do you adopt to serve your clients?

OR: Our investment philosophy is based on long-term beliefs with adequate diversification across regions and sectors. We invest in bonds, stocks and currencies; a wide range of asset classes that offer many investment opportunities and allow us to take advantage of fluctuations in financial markets with a disciplined approach.

K.N.A: We are looking for the best investment opportunities around the world, regardless of market conditions. This includes quickly adapting to changing market trends and controlling risk levels to ensure you always get the best distribution. In today’s environment, this means using all the resources at our disposal to proactively manage the many emerging risks.

DO: We long term investors. This means that we do not invest just a few days. Of course, when we discover that the investment assumption behind one of our positions is no longer valid, we promptly sell that position. But when we invest in a company, we do so after carefully evaluating and verifying that its performance is consistent with our beliefs.

What would you say to those considering investing in Carmignac Patrimoine?

K.N.A: Through our proactive and flexible investment approach, we are confident that we will be even stronger in the current environment and better able to serve the interests of our clients. In order to manage risk and seize opportunities, it is important to be able to invest in different asset classes with a wide range of opportunities, to protect the portfolio in the event of a downturn in financial markets and to reposition the Fund when the market levels off. This is how the Fund has been managed for more than 30 years.

OR: We have everything we need to take advantage of the market recovery when it happens. This is likely to be due to new stimulus measures in China to deal with the country’s economic downturn. The Chinese authorities are beginning to intervene as the situation is likely to increase inflationary pressures and reduce upside potential.

DO: Also, given the growing concerns about responsible investment, I would add that Carmignac Patrimoine promotes environmental and social performance2. Integrating environmental, social and governance (ESG) criteria into our investment process has been a key element in recent years and will remain in the future as we believe it fits perfectly into our active investment approach.

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