e-fundresearch.com: From a Greek tragedy to a massive correction on the Chinese A-Share market: What are your personal lessons learned from year-to-date market developments?
Jean Médecin: Both the Greek tragedy and the Chinese A share market correction have led to spike of volatility on the financial markets. Interestingly neither the ECB quantitative easing nor the Chinese authorities interventions have been successful in quelling those spikes of volatility. This is probably caused by the increased investors herding which means that in order to build performance, asset managers need to stay ahead of the game and be disciplined to look through the volatility and stay positioned on fundamental convictions with long term real potential.
e-fundresearch.com: What is Carmignac Patrimoine’s current approach to equities? Which themes are promising the strongest potential?
Jean Médecin: Our equity bucket within Carmignac Patrimoine is concentrated on companies that can grow their earnings irrespective of the macroeconomic momentum. Among the sectors where we find some compelling structural growth opportunities are the healthcare and the technology sectors. Some of our core internet names such as Facebook, Google or Amazon have recently shown their superior earnings power. Beyond those sectors we also like companies offering significant self-help earnings upside thanks to mergers or restructuring. A good case in point being LafargeHolcim.
e-fundresearch.com: Many market participants have been surprised by high bond market volatility in the first half of 2015: How did the Carmignac Patrimoine navigate through this environment and what are the key themes that are currently being played in the fixed income portfolio?
Jean Médecin: Even if the timing of this bond market volatility spike was uncertain, its occurrence did not surprise us. Early this year we warned investors in our monthly note that central banks interventions had polarized investors, temporarily putting a cap on volatility, but at the same time had increased markets fragility as adjustments would be more sudden and brutal. We navigated this period by being disciplined on our entry and exit points, as well as by implementing some relative strategies (like being long the European periphery and short the safe haven bonds) to capture spread differential while smoothing our overall return volatility.
e-fundresearch.com: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in the remaining months of 2015?
Jean Médecin: The recent Chinese decision to depreciate their currencies will create some additional uncertainties. Will the Chinese leadership stick to a controlled volatility of its currency to support its aim of transforming it into an international reserve currency, or is this move the harbinger of a more sustained period of depreciation for the renminbi ? In any case this means that deflationary pressures around the world will intensify and that the US will be the single large economy in the world bearing the burden of an appreciating currency. This should support a very gradual normalization of the US monetary policy as well as sovereign bond yields remaining well behave. This in turn should be supportive to equity markets. But selectivity will remain paramount to pick up ideas with true upside.
e-fundresearch.com: Thank You!
5Y-Chart: Carmignac Patrimoine (FR0010135103) vs. Peer-Group-Average
