INVESTMENTS
Coming of age But it ’ s not only the attitude towards ESG principles that is changing in emerging markets . The countries themselves are undergoing a series of shifts , with COVID-19 being one of the main drivers . “ On the whole , Asia has handled the pandemic much better than the US and Europe ,” Hovasse said . “ That ’ s one of the reasons why nearly 80 % of Carmignac Emergents is allocated to the region 3 . Countries like China , Taiwan and South Korea outgrew their developed peers last year 4 .” Another reason is the structural growth in Asia . From artificial intelligence to 5G and electric vehicles , Asian economies have taken the lead in integrating future technologies and are spearheading the fourth industrial revolution . “ They are looking forward , they have plans to improve – those countries are investing in the technologies of the future ,” Hovasse said . Yet not all emerging markets are success stories , with countries like India and Brazil fighting new waves of infections . Even so , Hovasse stressed that investors can still find opportunities in Latin American economies . “ It ’ s the combination of promising macro fundamentals and the better management of the pandemic that makes Asian economies , and especially China , so attractive ,” he concluded .
IT ’ S THE COMBINATION OF PROMISING MACRO FUNDAMENTALS AND THE BETTER MANAGEMENT OF THE PANDEMIC THAT MAKES ASIAN ECONOMIES , AND ESPECIALLY CHINA , SO ATTRACTIVE …
Separating the wheat from the chaff The team prefers to invest in countries with strong macro fundamentals and balance of payments surpluses – signs of a healthy , well-funded economy in which households , corporates and government combined are generating more savings than they are spending . Identifying sectors that are underpenetrated is equally important , Hovasse said . “ You can buy a bank in countries like Mexico , the Philippines or Indonesia , where half of the population doesn ’ t have a bank account . Or you can buy a car company in India or China , where car ownership is much , much lower than in developed economies . Those are the kinds of investments we like . We ’ re looking for proper , long-term growth stories .” Ultimately , potential portfolio companies also need to demonstrate strong cashflow profiles . As Hovasse explained : “ You don ’ t want to buy capital-intensive businesses like oil , mining and construction companies . What you want to buy is companies that are able to self-finance their growth ”.
Meanwhile , the Fund Managers adhere to SRI principles and the Fund has its proprietary ESG integration , exclusion and engagement policies . Among others , Carmignac Emergents targets companies that make a positive contribution to society or the planet and favours those that have a low carbon footprint or show strong commitment to reducing their negative environmental impacts 2 . In a way , ESG is more important in emerging than in developed markets , not least because , as Hovasse puts it : “ a lot of emerging market companies still have a low level of ESG standards ”. He added : “ The level of accounting fraud is shocking , and the quality of accounting is very poor . A good ESG assessment can help you in that regard : it ’ s a key factor for alpha generation and risk management ”.
1
French ‘ Label ISR ’ in January 2019 and Belgian ‘ Towards Sustainability ’ in February 2020 . For more information , visit www . lelabelisr . fr / en and www . towardsustainability . be .
2
The Fund aims to achieve carbon emissions 30 % lower than its reference indicator ( MSCI EM NR USD Index ).
3
Source : Carmignac , portfolio as at 31 / 03 / 2021 . Portfolio composition may vary over time and without prior notice .
4
Source : International Monetary Fund ( IMF ), real GDP growth ( annual percent change ), 2020 data . Developed markets (‘ Advanced economies ’): -4.7 %. China : 2.3 %. Taiwan : 3.1 %. South Korea : -1 %.
Want to know more ? ( Re ) Discover Carmignac Emergents at www . carmignac . co . uk / en _ GB / funds / carmignac-emergents
Main risks of the Fund
EQUITY : The Fund may be affected by stock price variations , the scale of which is dependent on external factors , stock trading volumes or market capitalization . EMERG- ING MARKETS : Operating conditions and supervision in ‘ emerging ’ markets may deviate from the standards prevailing on the large international exchanges and have an impact on prices of listed instruments in which the Fund may invest . CURRENCY : Currency risk is linked to exposure to a currency other than the Fund ’ s valuation currency , either through direct investment or the use of forward financial instruments . DISCRETIONARY MANAGEMENT : Anticipations of financial market changes made by the Management Company have a direct effect on the Fund ’ s performance , which depends on the stocks selected . The Fund presents a risk of loss of capital .
Carmignac Emergents A EUR ACC share class : The recommended minimum investment horizon is 5 years . The risk scale of the Fund is 6 . Risk Scale from the KIID ( Key Investor Information Document ). Risk 1 does not mean a risk-free investment . This indicator may change over time .
Advertising material . For professional investors only . This document may not be reproduced , in whole or in part , without prior authorisation from the management company . This document does not constitute a subscription offer , nor does it constitute investment advice . Carmignac Emergents is a common fund in contractual form ( FCP ) conforming to the UCITS Directive under French law . Access to the Fund may be subject to restrictions with regard to certain persons or countries . The Fund is not registered in North America , nor is it registered in South America . The Fund has not been registered under the US Securities Act of 1933 . The Fund may not be offered or sold , directly or indirectly , for the benefit or on behalf of a ‘ US person ’, according to the definition of the US Regulation S . The Fund presents a risk of loss of capital . The risks and fees are described in the KIIDs ( Key Investor Information Document ). The Fund ’ s prospectus , KIIDs , NAV and annual reports are available in English at www . carmignac . com . The KIID must be made available to the subscriber prior to subscription . In the United Kingdom , the Fund ’ s prospectus , KIIDs , NAV and annual reports are available in English at www . carmignac . co . uk , upon request to the Management Company or for the French Fund , at the offices of the Facilities Agent at BNP PARI- BAS SECURITIES SERVICES , operating through its branch in London : 55 Moorgate , London EC2R . This material was prepared by Carmignac Gestion and / or Carmignac Gestion Luxembourg and is being distributed in the UK by Carmignac Gestion Luxembourg UK Branch ( Registered in England and Wales with number FC031103 , CSSF agreement of 10 / 06 / 2013 ). In Switzerland , the prospectus , KIIDs and annual report are available at www . carmignac . ch or through our representative in Switzerland , CACEIS ( Switzerland ), S . A ., Route de Signy 35 , CH-1260 Nyon . The paying agent is CACEIS Bank , Paris , succursale de Nyon / Suisse , Route de Signy 35 , 1260 Nyon .
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