Asset management boutique Carmignac’s headquarters are in Paris but it has two other main offices in Luxembourg, which opened in 1999, and London, plus smaller commercial offices in Spain, Italy, Germany and Switzerland. In Luxembourg, Carmignac employs around 50 staff. It’s also where 22 of the 35 funds it lists are domiciled.
Recently appointed as co-manager of the Carmignac Portfolio Patrimoine Europe fund--what the company calls a “flexible, socially responsible, mixed Europe allocation fund”--is Jacques Hirsch, who joined in July 2023. Prior to that (from 2011), he co-managed a multi-billion AUM, multi-asset fund that was rated five stars by Morningstar and in 2022 was in the top decile. At the same time, Hirsch also joined the company’s strategic investment committee, which provides to the firm’s broader investment team top-down, macroeconomic analyses.
At the time of the announcement, the chairman and CIO of Carmignac, Edouard Carmignac, called him “an experienced portfolio manager who has demonstrated his ability to deliver strong performance throughout various market conditions, including the volatility of recent years.” Most of Hirsch’s career, in fact, has been in the asset management industry, and he provided some of his insights with Paperjam.
20 versus 60
Of course, when investing at the age of 20 or the age of 60, different considerations should be taken into account. As Hirsch points out, on average, data (mainly from the US markets) shows equity in inflation-adjusted terms earning, over the long-term, around 6%-7% per year, while bonds bring around 3.5%-4%. Cash or short-term paper, meanwhile, bring around 2%-2.5%.
“So, you could say equities are superior, but the reality of the higher return comes with the risk of higher drawdowns, a lot more volatility,” he explains. “If you’re in your 20s, you should be able to focus on the fact that equities offer a higher return and not worry too much about the drawdowns.”
Meanwhile, for someone investing at the age of 60 or 70, for instance, equities could suddenly drop, potentially bringing about problems for someone who had hoped to put some of those earnings towards retirement. The advice for people to invest in equities while they’re young and perhaps reduce such exposure, Hirsch adds, is “broadly sensible”.
Furthermore, if equities are expensive, it’s not a good idea to be exposed to them, especially in one’s later years. Hirsch cites the example of Microsoft, which had reached a $600bn market cap by the end of 1999 (compared to $348bn at the start of that year). “Microsoft was a great company, but it was very expensive in 2000. If you would have bought it in 2000, it would have taken you 15 years to get back to where you were.”
Exposure to AI
For those somewhere in the middle of that age range, it’s generally good to be diversified. On a market equity basis, Hirsch says many are betting on AI. “The market is very concentrated around it, but in valuation terms, we’re talking about companies that are very expensive today,” Hirsch says.
Diversifying, then, could mean considering other US stocks which are not specifically AI-exposed, or moving toward European exposure. At the time of writing, the German federal election was still two weeks away, while the US and Russian presidents stunned the world with talks on a peace deal to end the war in Ukraine. Outcomes for either could potentially be gamechangers for Europe.
It’s important to be diversified. Having just an MSCI World position, I think, gives you too high an exposure to the US--and this exposure to the US gives you too high an exposure to AI.
Bottom line: “It’s important to be diversified. Having just an MSCI World position, I think, gives you too high an exposure to the US--and this exposure to the US gives you too high an exposure to AI.”
Hirsch says that last year their exposure to AI was above that of their benchmarks but has since been lowered. There were two reasons for this: first was that valuations were higher, so he says the risk-reward has possibly deteriorated somewhat. The second reason is linked to the hyper-scalers that are putting billions into AI each year and whether applications will be found and bring in returns on those investments. Furthermore, there doesn’t seem to be a monopoly on the technical side, given, for instance, recent news that the Chinese startup Deepseek has a more cost-efficient AI model.
In addition, in a 13 February flash note published on Carmignac’s website, diversifying in AI has also meant “looking at the AI infrastructure value chain to identify niche but essential players. Taiwan is emerging as a significant hub in this field. The region is home to several key companies that are not only crucial to the AI infrastructure, but also profitable, offering attractive valuations. This is partly due to the geopolitical premium associated with the region.”
Other diversification
According to Dow Jones Market Data, US-listed companies dominated the global equity market in 2024, with more than a 50% share. Within that, tech companies have been dominating the rally.
“Keep a bit of tech, because it’s the future and those businesses are actually spectacular, but if you can diversify away from tech in the US, away a bit from the US equity market altogether, that’s probably interesting,” Hirsch explains.
Rethinking investing with a more thorough geopolitical point of view was also echoed in CEO Edouard Carmignac’s 21 January 2025 letter, in which he wrote, “We all sense that world growth, going forward, will slow. Countries with poor political governance will be left behind. Already, differential forces are exerting themselves on growth: US versus Europe, India versus China, Argentina versus Brazil...”
Apart from Europe, Hirsch says other opportunities could take shape in emerging markets. “Some had a lot of pain last year, and we think that now they’re actually offering an attractive valuation,” adding that Brazil could be among the options to consider. Additionally, diversification in the form of fixed-income investments is another option. Hirsch adds that inflation-protected instruments in the US also appear interesting.
The role of risk tolerance
So, when shaping a profile, how can investors assess their own risk tolerance? Hirsch says the best is to “align what your future cash profile is likely to be and the volatility of the assets you’re going to invest in.”
It’s important to consider, for example, if there’s a big upcoming cash outlay--university expenses, a luxury holiday, purchasing a home, etc. In such cases, “I would strongly advise against buying equities because they’re volatile,” he says. “You could find yourself in a position where you’re forced to sell at a low.”
Align what your future cash profile is likely to be and the volatility of the assets you’re going to invest in.
As previously noted, it’s also important to consider the time horizon over which the investments will be made. When it comes to investing over the longer term, there are certain things to keep in mind. With classical bonds, Hirsch says the real danger is linked to unexpected inflation rates. “If inflation actually picks up a lot over the life of your investment, then the real, inflation-adjusted value of your coupon is going to decrease,” he says. “Unexpected inflation actually can destroy your income and then reduce the appeal or the effectiveness of the investment.”
On the other hand, exposure in most equities means you have exposure to a stream of earnings. “If these companies have got a strong pricing power, you get some protection against unexpected inflation.”
An eye on data
Behavioural finance is an economic theory that tries to explain how certain psychological influences impact one’s financial or investment decisions--biases which can at least partly help explain some of the more severe anomalies on the stock market. These considerations include concepts as vast as heuristic decision-making--using a rule of thumb or a quick mental calculation to make a decision--to herding behaviour, or the potential tendency of individuals to keep step with crowd thinking.
Hirsch says one of the most common mistakes investors make is falling into the trap of loss aversion--trying to avoid a short-term loss over a couple of days, for example, and therefore reducing that position. “But the reality is that what you actually lose sight of is the fact that over a three-, four-, ten-year horizon, what happens in the next two days is pretty irrelevant.”
It’s also important to be realistic when it comes to the probability of events happening that could impact investments. Hirsch adds as a reminder that there are plenty of ways for investors of all kinds to keep informed practically in real-time--gone are the days of looking up prices in a newspaper. While more sophisticated investors might subscribe to various services for information, there’s pricing information and market data easily accessible and readily available for even the less-savvy investors.
Sustainable investment outlook
When it comes to ESG criteria and ranking for companies, Hirsch says this information is readily available to professional investors. Broadly speaking, Hirsch says in his experience, most in Europe are still aspiring for Article 8 funds under the Sustainable Finance Disclosure Regulation. Also called “light green” funds, these are funds that promote environmental or social characteristics. These differ from Article 9 funds, which have sustainable investment as their objective (also called “dark green”), while Article 6 funds are those without a sustainability scope but which require asset managers to disclose sustainability risk.
In its 2024 retrospective, Carmignac wrote that the election of US president Donald Trump would be an “interesting moment for sustainable investment,” adding: “While the overwhelming narrative is that Trump will be bad for sustainability outcomes, we are more optimistic with sustainability now firmly embedded into regulation and corporate strategies.”
The retrospective summarised three major challenges to sustainable investment. One is rethinking these financing models in the context it called “reduced regulatory support, high public debt and low confidence in governments.” Secondly, it noted that the achievement of multinational initiatives, such as the Paris Agreement, is complicated as a result of deglobalisation. Lastly, aligning global realities with market outcomes in a more effective manner will require “a robust conceptual framework for assessing the trade-offs between environmental, social and financial capital.”
“More than just a distribution hub”
Carmignac opened its first international office in 1999 in Luxembourg, which today employs some 50 staff out of its roughly 300 total. As Paperjam recently reported, during Carmignac’s investors conference held in Paris on 23 January 2025, head of the cross asset team Frédéric Leroux said the initial aim was to use the grand duchy as a hub “for European distribution and international distribution”, initially with three flagship funds.
Now, said Kevin Thozet, member of the investment committee at Carmignac, it’s more than just a distribution hub,” adding: “We have people managing money in Luxembourg.”
€33.9 bn
Total Carmignac assets under management as of 31 December 2024. Established in 1989, the asset management boutique’s team includes 61 fund managers and analysts and offers 25 different investment strategies.
How can European savings be mobilised?
It’s a question , CEO of the Association of the Luxembourg Fund Industry, reflected on in a recent guest contribution to Paperjam ahead of Paperjam Club’s 10x6 event dedicated to the future of the Luxembourg financial centre.
A call to action needs to be taken, he urged, referring to the €14trn that European households, including those in the UK and Switzerland, have tied up in current and savings accounts. “This represents 41% of the net financial wealth of European households,” he wrote.
“In contrast, in the US, only around 15% of savings are not invested in capital markets. If Europe could mobilise these savings, it would free up about €5,500bn for the capital market and potentially the European economy.”
He called for Europe’s development of the Savings and Investment Union to be a top priority and for the focus to shift on discussions that would “prioritise integrating European capital markets to unlock their full potential for business financing and economic growth. This ambitious objective demands bold measures, from tax incentives to adjustments in labour laws.”
Weyland also proposed an array of ideas that could help empower citizens to take their financial future into their own hands and foster consumer trust and security--among them, for instance, introducing financial literacy courses at schools. .
This article was written for the to the magazine, published on 26 February. The content of the magazine is produced exclusively for the magazine. It is published on the website as a contribution to the complete Paperjam archive. .
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