The firm has several products available in the emerging markets space, but Carmignac Emerging Patrimoine – an FSA offshore-recognised portfolio – offers a mixed-asset approach, dampening the volatility of a pure equity play.
No fund in the IMA Global Emerging Markets universe offers this service.
Simon Pickard (pictured), head of emerging equities and manager of the fund, says the balanced product can keep a lid on volatility because it can invest across multiple asset classes, namely equities and fixed income. He points out he has no constraints in terms of how much of the portfolio has to be dedicated to equities.
"We’re very prepared to take equity exposure down to 10 per cent or even all the way down to zero per cent if we had to," he said. "We haven’t yet, but we have the ability to."
The fund has an annualised volatility of 8.85 per cent since launch – nearly half that of Aberdeen Emerging Markets and First State Global Emerging Markets.
The First State fund has an annualised score of 13.77 per cent over the period, while Aberdeen Emerging Markets has a volatility of 17.05 per cent.
While the Carmignac portfolio is less volatile due to its ability to diversify across asset classes, its performance has lagged its UK competitors.
While Pickard accepts the fund is likely to underperform during market upswings, because it can only hold 50 per cent in equities, he says it is a good option for investors who want exposure to emerging markets but who do not want to take on too much risk.
Since the launch of the UK share class in March 2011, the fund has delivered 4.03 per cent, marginally beating its composite benchmark – split 50/50 between the MSCI EM Europe and JPM GBI Global Diversified Global Composite indices.
As the graph below shows, while Aberdeen Emerging Markets returned significantly more, it did so with greater swings in performance.
According to FE data, Carmignac Emerging Gestion has a maximum drawdown of 9.45 per cent since launch – around half as much as Aberdeen Emerging Markets over the same period.
Performance of funds vs index since launch
Source: FE Analytics
As well as the allocation to bonds, the manager says that the biggest difference between Carmignac’s offering and those of the big names in the UK market is the team’s use of derivatives.
"The derivative overlay and ability to allocate between bonds and equities in a very dynamic way is probably the biggest difference [from First State and Aberdeen]," he said.
The portfolio has a low turnover of roughly 20 per cent a year, similar to that of the Aberdeen and First State funds, and a relatively concentrated list of holdings, typically no more than 60 stocks.
As the portfolio is not officially tied to a benchmark, Pickard explains that it has the flexibility to invest in a variety of "cheat" stocks – or companies that are listed outside of emerging markets, but which have a number of operations or sales within the region.
Pickard cites gold stocks listed in the US and Canada as examples, as well as casino giant Las Vegas Sands which, although US-listed, has 95 per cent of its gambling operations in Macau and Singapore.
The portfolio is tipped towards China, with nearly 20 per cent of its assets invested in the leading Asian economy.
The second-highest country weighting is Brazil – which Pickard says stands to benefit from Chinese demand for materials.
On a sector basis, the fund’s highest weighting is to financials, at 24.58 per cent, while the ever-popular consumer play makes up roughly 41 per cent of the portfolio, split between staples and discretionary.
Pickard expects domestic demand to continue to be a driver of growth in emerging markets and says investing in consumer-focused stocks is another way to keep volatility down.
The fund's total expense ratio (TER) is higher than that of the First State and Aberdeen emerging market portfolios, at 2.27 per cent.
It is available on a number of platforms, including Novia.
The manager also heads up the five crown-rated Carmignac Emergents fund, which has delivered second-quartile returns since launch in 2010. It has €2bn under management.