Carmignac gold exposure leaps 25%

Carmignac Gestion has increased its exposure to gold for the second successive quarter as it believes ‘further aftershocks’ from the European crisis could hit the market in the coming months, according to the firm’s latest quarterly report..

The French firm had already doubled its exposure to gold back in April and it has now increased by over a quarter to 14.7% for its Carmignac Investissement fund.

‘The European crisis, from which there could be further aftershocks in the coming months, may lead to more budgetary slippage, bolstering the role of gold as a safe haven,’ according to spokesperson Eric Le Coz.

‘With this in mind, we have increased the weighting of gold mines from 10.8% to 14.7% of Carmignac Investissement, primarily by strengthening our positions in Newmont, Red Back Mining, Goldcorp and Barrick Gold.’

The firm has also maintained its exposure to a dollar rise against the euro, with Le Coz stating that ‘underweighting the currency remains a key theme of our strategy.' He thinks the single currency’s technical recovery at the beginning of the third quarter is 'a temporary development.'

He also believes that the end of restrictive monetary policies in the emerging world is on the horizon, which will help to strengthen its currencies and benefit in turn the US.

‘It will benefit the United States much more than Europe, which must act rapidly to improve its public finances. The dollar should thus continue to rise after the recent correction resulting from the US slowdown.'

The first tangible signs of a US economic slowdown have also lead the firm to significantly reduce its exposure to the US growth theme, from 17.8% to 11.7%, for its Carmignac Investissement portfolio. However, Le Coz does remain positive on the US authorities making the necessary changes to help its economy.

‘US banks, which we included in this theme, have been kept despite their disappointing performance over the quarter,’ said Le Coz. ‘We still believe that, unlike European banks, balance sheets are now purged and that, given the need for the soundest possible banking system now that leverage has been reduced, the US authorities will be realistic and make regulatory changes that will not unduly penalise the sector.’

Meanwhile corporate bonds remain a large allocation within the firm's flagship giant Patrimoine fund, at 33%. Within this sector the firm is looking closely at adding to investment grade debt from European financials.

'Apparently credible stress forecasts and a recapitalisation campaign that will follow the publication of stress test results on 23 July could encourage us to strengthen our position in this segment.'