Carmignac formula blends caution, aggression

LUXEMBOURG (Reuters) - French fund firm Carmignac Gestion reckons it has an unusual record -- it started performing well last year when the subprime crisis hit, an event that has otherwise seen many an investor's results collapse.

Emerging markets and equities tied to the global commodities boom did the job, Eric Helderle, Carmignac's managing director, told a Reuters fund summit on Tuesday and it sees no reason to change course now.

"It won't be a short crisis," Helderle said. "You know when a crisis starts. You never know when it stops. We are preparing for a lasting crisis."

Carmignac, with some 13 billion euros ($20.6 billion) in assets under management, has mixed caution with aggression in its approach to financial markets since the crisis hit, using all the techniques its funds allow to protect investments.

The Carmignac Investment fund, for example, is required to have net exposure to stocks of 60 percent, but it can short up to 40 percent.

Helderle said the fund, with around 1.4 billion euros, had been taking up its maximum shorts, with the result that it had returned some 20 percent last year.

"We are short on the financials, real estate," he said. "European stocks are not our favorite these days with the dollar being so weak."

Carmignac's 3 billion euro balance fund, meanwhile, is required to hold a minimum of 50 percent bonds.

It is currently at 70 percent bonds and 30 percent stock. Nearly all of the stocks, however, are hedged -- that is, a long position balanced with a short one.

"We have quite aggressive themes on the long side so we need to balance," Helderle said.

AGGRESSIVE

Those themes are essentially to short the U.S. dollar and buy into the global commodity price boom.

"Two of our long term investments (have been) emerging markets and commodities, the stock sector not the raw materials themselves," he said.

Carmignac's view of emerging markets, moreover, follows the commodities trail. It favors producer companies with raw materials such as Brazil with its iron sector.

As for the dollar, Carmignac is expecting continued weakness although Helderle would not offer a projected euro/dollar rate.

"We have a long-term conviction that the dollar will be weak. This has helped us perform," he said.

Helderle said Carmignac's approach appeared to be working. Although markets have been in turmoil, the fund has seen large amounts of new money coming in to its funds -- a net 700 million euros over the first two months of the year.

(For summit blog: http:summitnotebook.reuters.com/)