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Carmignac, Who Called 2009 Rally, Bets on Emerging Market Stocks

Edouard Carmignac, who manages 48 billion euros ($61 billion) and correctly called the 2009 stock market rally, said he’s buying equities exposed to emerging markets and reducing his cash and gold positions.

Carmignac Investissement (CARINVT), which has 7.8 billion euros of assets, bought luxury-goods makers LVMH Moet Hennessy Louis Vuitton SA (MC) and Cie Financiere Richemont SA (CFR) and KFC owner Yum! Brands Inc. (YUM) for their emerging-market growth in the first four months of this year, he said at a Morningstar Inc. conference in London today.

“Emerging-market equity markets valuations we find pretty compelling,” said Carmignac, 64. “This risk aversion has affected equity valuations which overall remain attractive.”

Carmignac has almost quadrupled his assets under management since 2008 after his biggest fund, Carmignac Patrimoine, was unchanged that year compared with a 42 percent drop in the MSCI World Index. The Paris-based fund manager also correctly called the market rally from March 2009, allowing Carmignac Investissement to rise 42.6 percent for the year by betting on stocks including JPMorgan Chase & Co. Carmignac Patrimoine (CARMPAT) is in the top 2 percent of its peer group over the past five years, and Carmignac Investissement has beaten 94 percent of rivals in that time frame.

The Frenchman also bought equities including insurer AIA Group Ltd. (1299) and Chinese search engine Baidu Inc. (BIDU) at the beginning of this year, he said. Stocks with exposure to emerging markets now represent 45 percent of Carmignac Investissement compared with 37 percent at Dec. 31, he said.

Gold, Cash Reduced

The fund reduced its cash holdings to 4.2 percent from 8.9 percent at the end of 2011 and cut its investments in gold miners to 9.8 percent from 14.4 percent. The fund, which is up 2.3 percent this year, has also reduced its holdings of defensive stocks in spite of volatility in the euro region.

Greece for all intents and purpose has left the euro by now, by not abiding to the rules,” Carmignac said. “We will probably have to have a patchwork arrangement, which will additionally weigh on the markets.”

Equities are attractive even though Europe is headed for recession and will slow global growth, Carmignac said.

“On an equity risk premium they are cheap,” he said. “The return on bonds is artificially deflated right now because of quantitative easing, etc. For the foreseeable future as bond yields for public debt stay low, these risk premiums are attractive for us.”

The fund manager last month opened up a sales office in London, which will offer its products to U.K. wealth managers, institutional investors and private banks.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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