15 minute read
Maxime Carmignac talks about the unique set of opportunities facing the Anglo-French asset management boutique.
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Carmignac is well-known as one of Europe’s leading independent asset managers but less well-known is the quiet transformation that has taken place at the firm in recent years.
By Luke Jeffs
Central to that effort is Maxime Carmignac, the Managing Director of Carmignac’s UK Branch and the daughter of the company’s founder Edouard Carmignac, now chairman and Chief Investment Officer of the firm.
Maxime first joined the family firm in 2006 after a spell in investment banking in London and Paris, and two years at management consultancy McKinsey before leaving in 2008 for a hedge fund in New York.
She rejoined the firm in 2010 as a portfolio manager and became managing director of the Carmignac UK branch in 2013, a position she holds alongside her membership of the firm’s Strategic Development Committee and her chairmanship of the Strategic Product Committee.
Speaking in late January from the company’s plush London offices, located a stone’s throw from Buckingham Palace, Carmignac reflects on a solid performance in 2021 and looks ahead optimistically to the remainder of this year.
“Looking back on 2021, I am most pleased about the performance of some of our funds and the subsequent positive flows. We were able last year, in a challenging fixed income environment, to have all of our fixed income range in positive territory in terms of performance whereas all the benchmarks were negative so it was a perfect mirror in terms of performance versus benchmark.”
She added: “Carmignac is half fixed income and half equity so it was important for us to show clients that we are here managing positive returns in a challenging fixed income market. This performance was partly thanks to our unconstrained mandate. Rose Ouahba, our head of fixed income, has built a strong team within our fixed income range while I am proud also of what our equity long-short fund has achieved, which is showing a sixth year of top decile performance.”
Ouahba, who joined Carmignac in 2007, is one of 53 fund managers and analysts in London and Paris handling some €41.7billion (£34.8bn) of assets under management across 23 investment strategies.
A long-term, convictions-based investment manager, Carmignac has relied on French financial investment advisers to distribute its products. Today, their network of professional partners covers the entire country and they are considered ambassadors for the company. Carmignac funds are currently available in 15 countries worldwide.
Looking back on 2021, Carmignac said: “Reflecting that performance, we have raised more money and we have just disclosed an additional €3.7bn in 2021 of net flows which underlines the fact that now, Carmignac is back.”
This comment is a thinly-veiled reference to the low-point in the company’s 30 years history. In June 2019, Carmignac paid a €30m fine as part of a settlement to end a tax investigation.
More than two years on, however, Maxime Carmignac is keen to stress the changes that have taken place at the firm.
“Carmignac today is different from the Carmignac of the past. Carmignac used to be a bit of one man show, with one product and one strategy. This enabled spectacular growth between 2000 and 2010 but Carmignac has changed over time so today we have a wide bench of
Meet the future of the French asset manager
Carmignac: “These are volatile markets but one thing we say at Carmignac is that we are here for the long-term. We are a family business owned by the family and employees which gives us the luxury of being able to think longterm.”
talents. We now have more than 50 people in our investment team, half in London and half in Paris. We have developed a more bottom-up, stock-picking strategy that combines both Alpha and Beta.”
Carmignac likes the product diversification that the company has fostered, something she can take credit for after founding the Carmignac LAB in 2014 to test new fund ideas.
“Today we are proud to say we have more than seven funds over €1bn with another three around €800m. That is positive because it makes Carmignac more sustainable and has enabled us to provide more solutions to our clients. It is also positive because it creates a virtuous circle with our flagship funds. Our funds are like Russian dolls. If you look at Carmignac Patrimoine, the credit part was super-strong so we made a new fund out of it and here was born Carmignac Portfolio Credit, which is now €1.3bn, with close to €600m raised last year. This has been a big commercial success for us. Step-by-step we are building a more diversified product range.”
Looking ahead to 2022, Carmignac points to further successes linked to the Carmignac LAB.
“In June 2022, we will celebrate the anniversary of two promising funds. For fund buyers, the third anniversary is important so these two funds that were in the laboratory will finally see the spotlight. One is a fund that I built thinking about women called Carmignac Global Equity Compounders and the other one is called Carmignac Portfolio FamilyGoverned, which invests only in family businesses, which of course is something we know well at Carmignac.
“2022 also marks the anniversary of our OEIC range which was set up in May 2019 with six funds and we are looking forward to celebrating that three-year anniversary this year.”
Carmignac in numbers
e41.7 billion
of assets under management
15
countries in which funds are marketed
More than €2 billion
of equity capital*
300 Staff
Thinking of diversification, Carmignac is quick to assert her firm’s credentials in emerging markets.
“Carmignac has a long history of investing in emerging markets. In March 2000 our global equity fund had a 69% allocation to emerging markets. Everyone else was looking at US tech while we had a strong commitment to emerging markets. Our emerging market fund (Carmignac Emergents) is one of the oldest in Europe so this a theme at Carmignac.”
Looking to 2022, the firm likes China but offers a note of caution. Indeed Haiyan Li-Labbé, Carmignac’s fund manager with a focus on Greater China published in mid-January a paper that suggests investing in China requires selective positioning and a long-term approach.
Li-Labbé goes on to suggest that foreign investors’ recent fears about the country underline the need for a comprehensive understanding of the regulatory reforms taking place in China.
Carmignac said: “Looking at today, we know that China did well in 2020 and less well in 2021 but today there is a dissynchronisation in terms of quantitative easing between China and the rest of the world. We believe this will create strong opportunities but we have to be humble. We cannot ignore how China will react to the new Covid variant so that remains a big question mark for all of us.”
At the time of our meeting in late January, the world’s main equities indices were sliding precipitously though they have stabilised somewhat in recent sessions.
Carmignac stressed the importance of the long-term nature of the firm’s outlook, something that is partly made possible by its ownership.
“These are volatile markets but one thing we say at Carmignac is that we are here for the long-term. We are a family business owned by the family and employees which gives us the luxury of being able to think long-term. We don’t have quarterly targets to meet rather we have one objective: the long-term investment objectives of our clients.”
She added: “Some of our fund managers have grey hairs, they have been through a crisis before. If you look back to 2008 and the terrible performance of benchmarks that year, Carmignac was able to have a positive year. Carmignac has been through many crises. Our clients tell us that it is in times of crisis that Carmignac makes the greatest difference.”
With €40+ billion under management and 300 staff, Carmignac is not a small fund manager. But it is undoubtedly at the boutique end of the market given some of the largest managers can these days count their assets under management in the multiple trillions.
This presents a challenge when it comes to investing in technology, a key differentiator for some investors who have come to expect real-time, online access to investment reports.
Carmignac said: “The cost of doing business has increased in terms of technology, risk, compliance and ESG which is a problem because it raises the barrier of entry to new entrants and may limit entrepreneurialism. The technology costs have increased but there are two ways to compete.
“On the other hand of course, you have the boutiques. I tell my team: “We don’t pretend to be good at everything, we just want to be the best in some specific niches.” There will always be a need for boutiques.”
She added: “With the increased cost of technology, there is going to be a polarisation between the fight for scale and cost while there will still be a need for boutiques that offer the brand and the human side with emotions.”
Carmignac: “Everybody talks about ESG so the challenge is how do you differentiate yourself.”
We were able last year, in a challenging fixed income environment, to have all of our fixed income range in positive territory in terms of performance whereas all the benchmarks were negative so it was a perfect mirror in terms of performance versus benchmark.
Another key debate in the asset management industry is the rise of Environmental, Social and Governance (ESG) investing, and how firms can make themselves heard in a market where everyone is keen to promote their ESG credentials.
Carmignac said: “Everybody talks about ESG so the challenge is how do you differentiate yourself. Firstly, we take it seriously, we think about it actively so through engagement with the companies we invest in and we think about it with humility.
“We have been investing in ESG for many years, but we are aware that we are only at the beginning of being more aware of investments in ESG and it is only now we are getting clear guidelines. As we speak, we are starting to write new pages in the history of finance, especially for an industry that has a greedy image from the last financial crisis so this is exciting.
She added: “Sometimes we hear a lot from people talking about how they are going to change the world but, at Carmignac, we are a boutique, there are 300 of us managing €41.7bn so we have to be humble and that is important at this stage.”
Carmignac continued: “Having said that, how can we differentiate ourself at Carmignac? We have decided to be focused so to become experts in some parts of ESG. For the E, we have decided to focus on climate change. We have a fund that is focused on the energy transition (Carmignac Portfolio Green Gold) but we think about the trajectory rather than the levels.
“So if we had a choice between investing in the best-in-class renewable firms or engaging with the biggest polluters that have committed to go to 0% coal by 2040 for example, we think we can have more impact as an active manager engaging with the firm that has further to go. If the company is not heading in the right direction after three to six months we will divest.”
Carmignac thinks about the three elements of ESG as distinct from each other: “The S part of ESG is a subject that fascinates me. A lot of money and effort has been dedicated to the E part of ESG whereas the S is an evolving area. Before it could have been seen to be wishy-washy but now there is more data available so we can approach this sector with more conviction and quantitative analysis.
“At Carmignac, for us the S is about empowerment so that is empowerment of employees, the empowerment of customers and the empowerment of investors. We believe that a focus on those three empowerments will lead to a long-term over-performance for our investors.”
Lastly, Carmignac has a similarly specific approach to corporate governance: “In governance, we think about leadership. Given that everyone supports ESG, one of the risks we are running is that the industry is engaged in box-ticking. There is so much regulation there is a risk that we will lose the entrepreneurial spirit. I like the quote that governance and leadership are the Yin and the Yang of a successful firm but if you have leadership without governance this is a tyranny and if you have governance without leadership, this is an administration.”
Carmignac admits that box-ticking (or green-washing to give it its more common name) is a challenge but the asset management sector should remember what has made it a success – conviction and leadership.
She said: “Green-washing is a problem but I think there is more awareness around this risk. As I said, we are still at the beginning of this secular trend so we need to find time to adapt if the regulation doesn’t make sense. With the current EU Taxonomy for example there is a sequencing issue which puts asset managers in a tricky situation as they are needed to report data two years ahead of the corporate that are supposed to provide them with those data (Q1 2022 vs Q1 2024)).”
“So we need to stay agile as an industry to monitor the new regulation and I think there is greater awareness around greenwashing. Asset managers will be more careful in future.”
She concluded by stating that only one third of CO2 emissions are from public companies (as opposed to large stateowned oil firms) so institutional investors must be realistic in terms of their ambitions.
Another key theme in asset management is diversity and inclusion. It is also one that is important to Carmignac (the firm and the woman).
She said: “In 2016, I was lucky enough to work on the “diversity project” in London and set-up the mid-career workstream. At that time women made up only 14% of C-suite positions so there was obviously a problem in the mid-career stage.
“We identified four things that can help address this mid-career gap. They are: more flexible working, which Covid has accelerated; realistic internal and external role models; firms should provide more coaching to encourage women to “lean-in”; and engaging men to promote diversity.”
Carmignac feels that men have an important role to play in the promotion of equality in the work-place.
“I have seen so many groups of women together with no men that tend to look self-promoting and lacking in gender diversity. At Carmignac, we are lucky because 65% of our assets under management are co-managed by women and, if you look in the UCITS world, in the top
eight funds in Europe managed by women, two are from Carmignac, which is huge for our size. We are punching above our weight.”
Stepping back, she added: “Thinking about the long-term, there is a huge push towards diversity but we have to be careful to ensure that women are not being promoted simply because they are women. We have to be sure not to compromise on quality.”
Much of the diversity agenda has focused until now on engaging women more effectively at work but Carmignac thinks there is another important challenge.
“I think there is an elephant in the room, however. We talk a lot about women in the workplace but we are ignoring women as investors. I think the largest inequality between men and women is how to empower women as investors. There are studies that suggest that women will in four decades account for 70% of the total wealth because of their higher participation in the workforce and education and the gender pay-gap starting to close as well as the fact that 68% of women outlive men.”
She added: “So women are becoming more wealthy, but women are totally under-addressed by the financial community. There are studies that show women have different needs to men regarding finance but there are very few products on the market that can help them achieve their long-term goals.”
Carmignac cites one of her own funds - Carmignac Global Equity Compounders – as a good example of a fund tailored specifically to the investment requirements of women.
She concluded: “At Carmignac, I would like to help raise awareness among women about how to invest early in your life to benefit from compounding and then to provide them with easy, sustainable and purposeful investment products.”
Carmignac added: “Increased diversity in asset management will help engage women as investors but it is not enough on its own. There is a lot of attention to women as professionals but I see so little to women as investors.”
Maxime Carmignac
Managing Director of Carmignac’s UK Branch
Maxime Carmignac is the Managing Director of Carmignac UK office since 2013, responsible for the firm’s long-term strategy in the UK. She is a Member of Carmignac’s Strategic Development Committee, where she is instrumental in setting up the strategy of the firm with a particular focus on responsible investment and investment solutions. She also chairs the Strategic Product Committee. She started her career in Investment Banking in London and Paris and then joined McKinsey for two years before moving to Carmignac in 2006 as an analyst, covering the Energy & Consumer Sector. In 2008, Maxime expanded her international career by joining Visium Asset Management, an alternative investment firm in New York. Maxime returned to Carmignac in Paris in 2010 as a Portfolio Manager. Maxime graduated from ESSEC Business School.
