Didier Saint-Georges: Edouard Carmignac has ‘batteries’ left and sees a corporate operation very unlikely

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About three and a half decades in the financial markets. That’s the time that has passed Didier Saint-Georges analyzing and managing stocks and bonds for investors, making them earn (a lot) of money through Carmignac investment funds in the last 15. But every road comes to an end.

The French manager announced a few weeks ago that He will retire on October 1. Investors around the world are left orphaned by one of their main gurus, the one who has been number two in Edouard Carmignac and the main executor of the philosophy of the Gallic group, responsible for 41,000 million euros in assets.

“It is easy to be great, but it is not so easy to be great and efficient at the same time”, he says as the culmination of a long and successful career, praising the spirit and wickers of Carmignac. Its origins, however, go back to entities such as JPMorgan and Merrill Lynch, groups that took it to large capitals such as New York, London and Paris. Always Paris and her glamour.

Saint-Georges has been passing through Spain for several days, explaining to clients how the investment funds they have contracted will look like once he permanently retires. And the message is only one: continuity. The manager reserved a space for Invertia, to whom he has given his last interview to a Spanish media while he is still active. He is convinced that Edouard, the alma mater of Carmignac, they still have ‘batteries’ for a while and that it is quite unlikely to see the largest independent manager in the neighboring country and one of the main in Europe involved in a corporate operation.

What financial market did you find when you started and what markets do you leave us now, in a post-Covid 2021?

I started in this business in September 1987, and in October of that same year there was a crash market. I have experienced several crises: dot com, Lehman Brothers… There is a lesson from all of them. A bubble does not grow out of nowhere, it grows around a reality. Then reality is totally overextended, it becomes excessive and, therefore, there is a correction. A bubble is an exaggeration of reality. But that does not change the reality. If you look at the years 2007-2008 and you had the big winning companies, if you had done the right thing, even with the correction, ten years later these companies are much stronger.

As an investor, you have to manage market risk, crises, otherwise you will not survive. But you also have to remember that there are always trends that survive crises, and it is equally important to capture these trends.

We have learned one thing from this latest coronavirus crisis. For the first time, it was recognized that central banks were not enough to provide liquidity to the system. This time governments have had to step forward with extraordinary fiscal policy measures. But this pumping of liquidity has inflated everything, increasing the discrepancy between the real economy and the price of financial assets, and re-fueling bubbles in financial assets. That is why we are going to have to take into account again the double aspect: risk management and take advantage of long-term trends.

As an investor, you have to manage market risk, but also capture long-term trends. And now bubbles are re-feeding in financial assets

And which are the companies that will survive the coronavirus?

Long-term trends are again tied to technology. If we have more inflation in the future, we will have to see which are the companies that are able to resist an increase in costs. The key differentiator is pricing power, the ability to protect margins. Because potential growth remains very low, maybe 2%. Companies that do well in a low-growth scenario will continue to be the best. There is a premium towards quality.

Perhaps one thing that will change is inflation. This crisis has created a deep dislocation, not only in financial markets, everywhere, but also in the real economy. Now the demand is rising, people are normalizing their lives, but low inventories create great shortages in many materials. From semiconductors to food, passing through raw materials. These shortages are not easy to repair. And this creates a risk.

The population as a whole has more savings after the pandemic, the shortage will generate an increase in the prices of goods, but there are some sectors where companies will not have the power to set prices and for these companies there will be a narrowing of margins , because if the finalist price does not grow as fast as the wholesale price, the margin will pay dearly. This crisis has reinforced the competitive advantage of powerful players with pricing power.

The president of the European Central Bank, Christine Lagarde.

The president of the European Central Bank, Christine Lagarde.


What is your assessment of the mandate of Christine Lagarde at the head of the ECB?

Lagarde has it a lot easier than Jerome Powell. The ECB will have some milestones in how it reduces its monetary support, but it will be very progressive. In the United States, however, the Fed has to face higher prices in the most pronounced system. There the question is: How do I control the increase in inflationary pressure without bursting the bubble? It’s going to be a tough job in the next 12 months on your part. Lagarde is not in this situation yet. Europe can continue in a scenario of monetary support in the style dovish and very progressive in the withdrawal of stimuli.

What is the key to Carmignac’s success?

Protect clients’ money when there is a crisis while keeping an eye on and capturing long-term trends. The Anglo-Saxon saying says that “long term is your friend”(“ The long term is your friend ”), but you cannot tell an end customer that in a year of crisis his fund has lost 30% or 40%, because at that very moment your relationship with him ends.

In recent decades, we have survived many crises and have excelled in them. That made us famous and that’s where our reputation was built. But we have also captured in the last 30 years the super cycle of raw materials, the rise of emerging markets or the technological wave.

As the markets have become more complex and we have managed more money, we have reinforced the teams with more fund managers, analysts or other resources, but we have also found that this is not enough. You still need efficiency in your decision process. You can have huge teams but suffer the risk of not having the agility or decision-making capacity when it is necessary to have it. We have managed to combine all this increase in resources with an effective decision-making process. It is easy to be great, but it is not so easy to be great and efficient at the same time.

The strategic investment committee, with Edouard Carmignac at the center.

The strategic investment committee, with Edouard Carmignac at the center.


What do you think will be the star fund of the house in five years? Will Carmignac Patrimoine and Carmignac Sécurité continue to be the best sellers as they have been up to now?

If I as a client had enough tolerance for volatility, maybe I would buy a pure equity fund. Carmignac Investissement is a great fund, but you have to be aware of the inherent volatility that can be in this asset class. In Spain, but also in France or Italy, there is a lot of aversion to volatility, and this leads me to think that the preference for diversified and conservative funds will remain very strong, so there is still a path for funds such as Carmignac Patrimoine or Carmignac Sécurité, that manage risk.

Is his retirement the step before the retirement of Edouard Carmignac?

Edouard is very well, as I am. In addition, he still has a passion for this business, and on the same level as his other passions such as contemporary art or sports. But he has the ability to enjoy all these passions together at the same time. He has made it clear that his daughter Maxime will take the reins at some point. She has been assuming ever greater importance in recent years but, at the moment, I don’t see in him a sign that she wants to retire in the near future.

Maxime Carmignac.

Who will replace you as CEO and on the strategic investment committee?

Nobody is indispensable. I don’t need to be replaced by anyone in particular, there is a very cohesive team with a process where everyone participates. The strategic investment committee has been expanded by one person recently with Keith Ney and will now be reduced by one person when I leave, and that’s fine. It is exactly what is needed: a focused and efficient committee.

Do you see it likely that Carmignac will end up being a participant in a corporate transaction with another management company?

Edouard and Maxime have made their wish for Carmignac to remain independent very clear. First, there is a culture of control that has always been convinced that independence and freedom are absolute conditions to remain so effective. If you got into an operation, you would lose effectiveness. Being independent is in the DNA of the company. But it is that, in addition, experience says that, when independent firms lose their independence, their withdrawal or decline quickly begins. In this business, being independent is a competitive advantage.


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