Crowl (pictured), a member of the investment committee at Carmignac Gestion, says the firm has taken a strong view on the fundamentals of frontier markets and made them a more significant part of its emerging markets funds. The Carmignac Emerging Discovery fund now has nearly 40 per cent of the portfolio invested in the sector.
"It will never be a frontier markets fund, but this is the highest weighting that we’ve ever had in frontier markets," she said.
FE Alpha Manager Simon Pickard recently told FE Trustnet that while his large cap Carmignac Emergents fund is not able to directly invest in some of the opportunities in frontier markets purely on virtue of their size, he takes advantage of indirect exposure to the sector as often as possible.
Carmignac Gestion is one of the leading fund houses in Europe when it comes to emerging markets, with 25 years’ experience managing funds in the space.
"We’ve been investing in emerging markets since the inception of the firm in 1989," Scrowl said.
Since many investors are wary of turning to fund managers that have not experienced a financial crisis, Carmignac Gestion stands out in the emerging markets space because the team has been investing through the cycle in the developing world, experiencing the euphoric highs and sudden pitfalls that come with the territory.
As a result, the firm has developed a "two-pillar" style that combines a top-down approach which takes into account a milieu of macro events that could derail returns, and a bottom-up stockpicking style that leads the team away from the typical holdings of the leading indices.
"We have to rely on good stockpicking to get strong performance in the portfolios," she said.
Crowl highlights the "grass roots" expertise of the team in emerging markets, pointing out that Carmignac Gestion founder Edouard Carmignac spent time living in Peru in his early life.
Crowl says there are four key factors that set Carmignac Gestion apart from other managers in the emerging markets sector.
Global approach
"From our top-down based perspective, we want to be involved in the global space rather than a restricted, specialised space," she said.
Non-benchmarked
"We want to make a global portfolio in a non-benchmarked environment. We haven’t restricted it because as we know, over the cycle, there are countries in emerging markets where we don’t want to invest."
Daily meetings
Carmignac Gestion is run by 26 investment professionals, five of which are dedicated to emerging markets.
The emerging markets team is headed up by FE Alpha Manager Simon Pickard. He is joined by Xavier Hovasse and David Young Park, managers of the small to mid cap focused Carmignac Emerging Discovery fund.
The team also has two analysts: Haiyan Li-Labbe, who specialises in greater China, and Edward Cole, who looks at the EMEA region.
According to Crowl, the entire investment team sits down together on a daily basis to discuss ideas and allocations in the firm’s fund range, something no other asset manager does.
Amount of travel
Crowl says the team has visited more than 50 countries in the last two years.
She commented: "It is important, especially in emerging markets, to be on the ground. If we don’t have an understanding of what a company is doing in a country, then we won’t invest."
Fund range
Carmignac Gestion’s emerging markets range consists of three portfolios – the five crown-rated Carmignac Emergents fund, run by Pickard, as well as Carmignac Emerging Discovery and the Carmignac Emerging Patrimoine fund. The last is a mixed-asset portfolio modelled on its flagship Carmignac Patrimoine fund.
Carmignac Emergents is almost entirely large cap focused, while the Emerging Discovery portfolio invests further down the market cap spectrum.
Crowl says there is no crossover between the two portfolios.
One key point she stresses about the funds is that they are significantly more stable than their peers.
Our data supports this view: over the last three years, the Carmignac Emergents fund has been less volatile than both the IMA Global Emerging Markets sector and the MSCI Emerging Markets index, with an annualised volatility score of 11.51 per cent.
The flagship emerging markets portfolio was only launched in the UK market in December 2010, but its offshore share class has been around for much longer.
According to FE Analytics, the fund has beaten the IMA Global Emerging Markets sector and MSCI EM index in seven out of the last 10 years.
This has translated into strong cumulative returns of 302.7 per cent over the last decade, compared with 283.23 per cent from the sector, and 296.34 per cent from its benchmark.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Liquidity is also something the firm takes very seriously, says Crowl.
The Carmignac Emergents fund currently has €2.2bn in assets under management (AUM), which Scrowl says is perfectly manageable given the large cap, liquid nature of the stocks it holds.
However, she says the firm would consider capping the small to mid cap focused Carmignac Emerging Discovery fund at €1bn in order to protect liquidity. The fund currently has €325m in AUM.
Both funds are available on select UK platforms, including AXA Elevate and Novia.
This article was written in collaboration with and is sponsored by Carmignac Gestion.
