Rethinking reinvestment
Unlocking the true power of compounding
May 2025
Source and Copyright: Citywire
Welcome to another edition of SOURCE, the publication that shines a spotlight on selected strategies and their managers. This time, we look at FP Carmignac Global Equity Compounders. Discover more in our profile and Q&A with Mark Denham, Head of Equities and Fund Manager at Carmignac, and co-Fund Manager Obe Ejikeme, as well as exclusive supporting analysis from Citywire.
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investment profile
sector overview
fund manager q&a
investment profile
sector overview
fund manager q&a
investment profile
sector overview
fund manager q&a
investment profile
Performance overview
fund manager q&a
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Rethinking reinvestment
Unlocking the true power of compounding
FP Carmignac Global Equity Compounders is putting quality at the core of its ambitions, and it is thinking long term.
The overlooked opportunity at play in compound equities
Albert Einstein once called compounding interest ‘the eighth wonder of the world’, and the willingness to tap into reinvestment over time is what drives FP Carmignac Global Equity Compounders.
The strategy, co-helmed by Head of Equities, Mark Denham, and Fund Manager Obe Ejikeme, is designed to capitalise on large-cap global stocks which not only show considerable growth prospects but are funding their own evolution.
‘When most people talk about quality companies, they’re talking about businesses that have a high level of profitability,’ said Denham. ‘They’ve demonstrated that they can sustain a high level of profitability through a business cycle, together with other similar financial metrics like low leverage, strong balance sheets, good management and so forth.
‘For us, equally important is the ability and willingness of companies to reinvest a significant proportion of their profits internally, to grow the business for the future,’ he added. ‘Across our portfolio, on average, our companies reinvest more than 75% of their profits internally to grow the business.’(Carmignac, as of 30 April 2025)
The Oeic, which hits its five-year anniversary in May, has found that many stocks in the information technology and healthcare sectors are meeting Carmignac’s quality requirements. The two sectors currently account for more than 50% (Carmignac, as of 30 April 2025) of the fund’s assets.
Denham singled out Danish group Novo Nordisk as an example of the type of company they are looking for in the long term. ‘Novo Nordisk was a name in the fund at the outset because it exhibited the criteria we would look for. Subsequently, of course, they benefited from this obesity theme, even though when we bought them, nobody was talking about obesity.’
‘We still believe that the demand for obesity drugs is there, and these types of companies will dominate the market for the next 10 years. They have interesting drugs in their own pipeline to protect their competitive position and should be growing their obesity and diabetes products, expanding sales and profits 20%-plus for the next three to four years.’
Spreading the net
Investment profile
Head of Equities
and Fund Manager
Mark Denham
‘Across our portfolio, on average, our companies reinvest more than 75% of their profits internally to grow the business.’
The overlooked opportunity at play in compound equities
Fund Manager
Obe Ejikeme
‘It’s amazing because we all say we’re long-term investors, but then you have a strong pullback in the market and people forget it.’
The pullback experienced by the stocks over 2024 has only served to supply an attractive entry point, Denham said, as the company is still viewed as having 'strong, long-term potential.'
While the fund is not thematic in its nature, the managers are conscious of strong structural drivers at play, such as the growing influence of AI on the business world.
With technology accounting for the largest sector bet, Denham and Ejikeme have sought ways to access this booming interest through established names, even if they don’t post the ‘shoot the lights out’ numbers of some competitors.
‘Businesses like Microsoft and Nvidia were in the portfolio long before anyone talked about artificial intelligence,’ Denham said. ‘I think it’s been a little bit of a myopic obsession with exactly how fast Azure grows from one quarter to another. I think people are missing the wood for the trees there.’
Despite the notable rotation out of crowded US technology, the portfolio managers remain highly confident in Microsoft exploiting its strong position and, indeed, the Microsoft Copilot, one of their shots on goal for AI.
The global equity approach has not been able to operate in a vacuum, as rising rates, the return of inflation and the uncertainty caused by the early policies of Donald Trump’s second term have all coalesced. But, Ejikeme said, there are opportunities thanks to the wider regional remit.
‘I would say if we look at 2025 and how that’s differed, the one obvious dominant theme in the market is the disparate performance of the different regions. The US was very strong in 2024 and actually started off on the back foot this year, and has not been a big driver of equity performance.
‘The growth expectations for this year are fairly similar to last year. Most people are starting the year expecting profits to grow at the same pace as last year. I think what’s happened in the first quarter, at least up until now, has been this reset of expectations about some of the Magnificent Seven. They had a phenomenal year last year, but it looks to be more subdued this year.’
Denham highlighted how the fund also operates a macro overlay, which complements the bottom-up stock selection and helps to change stock position sizes rather than chop and change the entire portfolio during periods of political volatility.
‘When stocks get closer to our near-term fair value, we actively reduce our sizing and similarly, over a space of 12 months, if they get further away from our 12-month fair value, we will re-increase them – although the names in the fund don’t change that frequently, which is one of our signatures.
‘We’re investing for the long term, we believe in our companies of proven compounders. But to address those issues that you talked about, we’re constantly having to resize.’
The portfolio managers view FP Carmignac Global Equity Compounders as a vehicle that could sit as a core holding for clients looking to access stocks. Ejikeme said the global nature of the fund, combined with its diversification across sectors and regions, is important – as is the considered long-term thinking. The duo is keen to maintain a ‘buy and hold’ mentality in a fast-changing world.
‘It’s amazing because we all say we’re long-term investors, but then you have a strong pullback in the market and people forget it. If you’re a long-term investor, you can see through at least a business cycle, which is typically three to five years in length, then that gives you plenty of time to see some of the best companies that we can own.
‘If you’re not already in a fund like FP Carmignac Global Equity Compounders, it’s an even more interesting opportunity and timing, given the geopolitical uncertainty and the impact it had on sentiment towards, in particular, US stocks. They’ve particularly been hit quite hard by this. So, if you’ve got a longer-term time horizon, I think those are the type of investments that do quite well for this fund.’
Genuine long-term goals
Frank Talbot
Performance overview
The FP Carmignac Global Equity Compounders has delivered returns which have been consistently above the peer group since its inception five years ago. Since launch on 15 May 2020 to 15 May 2025 the fund has returned 72.1% in sterling terms, compared with the average fund in Morningstar’s Global Large-Cap Growth peer group’s 51.4% gain. This is, however, less than the fund’s benchmark – the MSCI World NR USD – which has risen 88.4%. This underperformance stems from a poor run during 2022’s equity market selloff in which the fund gave up 18.8% compared with the index’s 7.8% decline.
This can be partly attributed to a sector rotation, wherein growth stocks have suffered due to rising interest rates. Concurrently, cyclical stocks, especially those in the energy and commodities sectors, which are absent from the portfolio, have capitalised on soaring inflation. However, these losses were less than those suffered by the MSCI World Growth NR USD index – the default benchmark for the peer group – which fell 20.3% and in line with the peer group’s 17.5% loss. Since that point, returns have been good, outperforming the benchmark over the past three years with gains of 12.6% compared with 11% for the MSCI World NR USD and 9.2% for the average fund. The fund has also held up well during the turbulent 2025 so far, minimising losses in sterling terms to 2.4%, versus a 1.8% slide in the index. Note: the returns are positive in US dollar terms, but the weakening dollar relative to sterling has drawn it into the red.
Performance overview
Head of investment research, Citywire
The fund’s monthly standard deviation is broadly in line with the average fund in the peer group and the MSCI World since inception. However, its maximum drawdown, while close to the average fund’s, is considerably higher than the benchmark with a figure of -20.4% for the fund compared with -11.1% for the index, with these losses sustained in 2022. Again, however, when compared with the growth variant of the MSCI World – which is arguably more appropriate for this fund – then they are less than its 20.8% fall, indeed its standard deviation is less than the growth index.
The fund is more volatile than broad global equities, but less than growth
Outperformance of index over three years pushes fund ahead of peer group
The portfolio has dealt admirably with the volatility induced by President Trump's whirlwind start to his second term. Over three months and the year to date, it has bettered both the peer group and index. The past 12 months, however, have been more mixed with the strategy lagging the initial rally in equities which greeted Trump’s victory, and the fund is in the upper third quartile. Over three and five years, however, the fund’s gains of 12.4% and 11.5% annualised are good enough for the second decile and are ahead of benchmark over three years.
The art of true long-term investing needs an approach which can survive and thrive in uncertain times.
Keep calm and compound
‘Cubilia facilisis nostra torquent curae massa.’
Integer
congue euismod netus
Praesent aptent
Fund manager Q&A
Global equity has been underpinned by the powerful returns of select stocks in recent years, so how can investors diversify and prepare for a change in market sentiment?
Carmignac’s FP Carmignac Global Equity Compounders fund is designed to challenge conventional thinking around long-term investing and offer a compelling alternative for alpha-seeking investors in uncertain times.
In our interview with Mark Denham, Head of Equities and Fund Manager at the asset manager, and his co-Fund Manager, Obe Ejikeme, we delve into the current investment case for compounding, how it compares with previous cycles and where the pair are finding their best investment ideas today.
We map out in greater detail how the strategy functions and what the fund managers focus on to unlock both quality and growth in their strategy.
Keep calm
and compound
Keep calm
and compound