How Carmignac’s star managers are positioning for 2013
by Matthew Goodburn on Jan 25, 2013 at 15:24
The French firm's leading managers reveal their latest thinking and their top investment plays for the year ahead.
Leroux warned on weakening growth in Germany and despite ECB boss Mario Draghi's pledge to do whatever it takes to underpin the eurozone, he ‘does not see the momentum that the European economy will turn in the second half of the year as lending activity has gone back into negative territory'.
On the UK: ‘The drastic spending cuts are beginning to have some positive effects but it is very painful. Inflation is well above that in the US or Europe so at some point the Bank of England will have to put a stop to its monetary policy.’
On Japan: ‘It is back on centre stage due to its 2% inflation target and a depreciation of the yen is a likely outcome. This could have a destabilising effect on some of its regional competitors such as South Korea.’
The firm's head of fixed income is wary of rate rises in safe haven countries such as the US and Germany and thinks a stronger dollar is likely in the second half of the year.
She warned of tension in safe markets like Germany and the US and expects to see more deflation in Europe.
She has increased the fund’s bond exposure in peripheral Europe, with unhedged positions in Turkey, Russia and Poland and is ‘returning to Spain and Italy.’
She said: ‘We expect equity returns to remain stable but we have increased our futures positions and are concerned about an uptick in interest rates.’
Field has piled back into industrial metals to make it a fund overweight for the first time since the second half of 2011.
Exposure to copper has been increased dramatically due to a combination of supply constraints and renewed demand from China.
He told Citywire Global: ‘China has 40% of the copper market and even if its economy grows at just 5% a year it would still need half a million tonnes of new copper a year for its power supply, white goods and wiring, just to keep up.’
Field also expects the oil price to be less volatile in 2013, barring major geopolitical shocks.
He said: ‘Partly due to the energy revolution in the US, daily global production has gone from 5.5 billion barrels a day to 7 billion. Unlike with almost every other commodity, China is not the biggest consumer of oil, and we don’t see huge developed world market growth so it is unlikely we will see a huge spike in the oil price. Demand is rising but it is not aggressive.’
Carmignac Emerging Patrimoine
Pickard has dramatically increased his financials weighting over the last few months, from 12.6% in mid-2012 to 24.3% at the end of December in what he calls ‘an expression of our optimism on emerging markets’.
Allocations to Mexico and Turkey have been increased while Indonesia has been reduced, but the biggest change has been the increase in China exposure, up to 20% of the fund from around 16.5% a year ago.
Meanwhile, exposure to Asian exporter rivals of Japan has been decreased, on concerns that Taiwan and South Korea will feel the squeeze if Japan does manage to reassert itself in the likely event of a depreciating yen boosting its own export sector.
Carmignac Emerging Patrimoine
Zerah believes that safe haven assets look expensive and is avoiding German bunds completely, while reducing US treasuries exposure.
He told Citywire Global: ‘We see more value in peripheral countries and BBB-rated and BB-rated corporates are offering the best value.
The Carmignac Global Bond fund is overweight in financials, and emerging market local debt has been increased through bonds in Mexico, Malaysia, Poland Turkey and Russia.
He said: ‘We never thought the euro would break up and we expect some of these countries to lower their financing rates.’
In Latin America Zerah prefers Mexico as he believes the spread on its debt compared to the US is too high.
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