Carmignac’s Charles Zerah has taken profits on profitable peripheral sovereign debt positions and rolled the capital into UK debt in his €1.18 billion global bond fund.
The Citywire + rated manager said the current environment was favourable for bonds and he is seeking opportunistic exposure.
This has seen Zerah target New Zealand, Sweden and the UK as high-conviction exposures in a deflationary environment within the Carmignac Pfl Global Bond fund.
In the latest fund update, Zerah said: ‘The fund increased its allocation to UK debt, boosting performance as deflationary pressures in the United Kingdom seem to be pushing back the date of a future Bank of England rate hike.’
Of the fund’s current top 10 positions, Zerah has a 50-year UK Gilt as his fourth largest position. New Zealand government debt accounts for five of the top 10 overall bond bets.
Elsewhere, Zerah said he had trimmed back on peripheral debt, which had served him well during a volatile period for European bond markets.
‘The month of March was marked by launch of the ECB’s quantitative easing and discussions about the political situation in Greece. Although these negotiations revived volatility on European bonds, yields were only marginally affected.
‘In this context, the fund drew strength from its European bank bonds and seized the opportunity to take some profits on peripheral sovereign debt.’
The largest allocation in the fund, at a currency level, is in euros, which makes up 69.4% of the fund, while US dollars accounts for 21.8%. In a separate investor update, Zerah said he was holding no emerging market currency exposure due to the current dollar strength.
Elsewhere in the fund, Zerah has increased developed world government bond exposure from 65.89% in February to 74.85% as at the end of March. This is while significantly reducing cash and cash equivalents, which fell from 11.79% to 0.7% over the same period.
The Carmignac Pfl Global Bond A EUR Acc fund returned 16.9% in US dollar terms over the three years to the end of March 2015. The fund’s Citywire-assigned benchmark, the JP Morgan Global GBI Unhedged TR, rose 10.3% over the same period.