Carmignac, one of the largest independent French management boutiques with 35 billion euros in assets, has suffered setbacks in recent years. Edouard Carmignac, its founder, explains. He reveals his intentions regarding his succession, evoking his daughter Maxime Carmignac.
Founded by Edouard Carmignac in 1989, the management company for Place Vendôme is one of the largest independent French boutiques, with 35 billion euros in assets. The master of the place is a figure of the Place de Paris. His letters to the President of the European Central Bank published in newspapers contributed to his fame, as much as his collection of modern and contemporary art (Basquiat, Warhol, Barcelo …), exhibited in his foundation, in Porquerolles, and in its offices. Parisians. The Carmignac house has experienced setbacks in recent years. Its founder explains this and reveals for the first time his intentions regarding his succession, without naming her daughter Maxime Carmignac.
Carmignac went through difficult times. Where is the reorganization at?
2019 was a year of consolidation, marked by better integration of the teams we have recruited over the years. I’m happy with the situation today: we had to bring in the right people and get them to work together. When the organization appeared solid and stabilized to me, I made the decision to entrust the management of the Patrimoine fund to Rose Ouahba and David Older, respectively responsible for bond and equity management, to focus on the management of the portfolio. investment policy.
Have you made a decision about your estate?
I am passionate about what I do and I am in good health. It’s complicated to sell what you have done with your name. I am fortunate to have a brilliant, very capable daughter who, like Abigail Johnson at Fidelity, has gone through management, sales and administration. When I started this company over 30 years ago, I dreamed of Carmignac being a family business. Fidelity is in the third generation, we will tackle the second. As far as I am concerned, I remain President and Director of Investment Policy and I will make sure to be there for as long as I am having fun, but more importantly as long as I am useful. My mission is to prepare the company for the future.
The declaration of too large a part of your profits in Luxembourg has led to several adjustments for corporate tax, according to “Challenges”. How is your tax result distributed between the different jurisdictions, France, Luxembourg, and the United Kingdom, in particular?
Over the past 10 years, cumulatively, nearly 60% of our operating income has been taxed in France and nearly 75% of our corporate taxes have been paid in France. Over this same period, more than 75% of assets managed are on behalf of savers located outside France.
How much did you pay the tax authorities for all transfer pricing adjustments?
It’s from the past. The disputes covered 7 years ending in 2015. Ultimately, the amounts were fully provisioned in the group’s accounts. They do not at any time and in any way concern the interests of our customers and partners and are inferior to what I read in a recent press article. [300 millions d’euros, selon « Challenges », NDLR].
What was the result of the complaints filed with Bercy on the adjustments related to transfer pricing?
We have agreed with the administration on the sharing of revenues between the various activities of the company according to the contribution of each.
You say that all discussions with tax administrations are now closed. But are there still ongoing proceedings and have the tax files been sent to the criminal justice system?
This file is behind us and the penal aspect is closed. We are totally focused on our clients and on our mission, to manage their savings over the long term.
You have equity capital, could you be a player in consolidation?
It is true that we have more than 2 billion of equity. They reassure our customers about the longevity of the house and help build a core of unlisted investments.
Could you diversify your funds towards the unlisted?
Maybe eventually. We don’t have a timetable. Currently, the private equity market is too expensive, as we can clearly see with some disastrous IPOs.
How do you analyze the performance of your wealth funds in 2019?
Patrimoine, our flagship fund was seen as a bit of a “miracle” fund that avoided serious market air holes until 2008. This was not the case in 2018. Even if it finished l he year 2019 with a positive double-digit performance, it undoubtedly erred from the excess of caution in our management at the start of the year. The outflow has logically continued. Heritage funds are less attractive today, like all products combining equities and bonds. The upcoming air holes in the equity markets will allow them to regain legitimacy thanks to the protection they can offer.
Are you going to change your business strategy?
Quality management comes at a cost. We have to pay the teams at their fair value. Rather than making an effort on our prices, we prefer to focus on the quality of service and live up to our customers’ expectations in terms of performance.
US manager BlackRock has been accused of influencing the government on pension reform. What is your reading of this case?
We must see, in this story, that we are only talking about a supplement to the pay-as-you-go pension. A simple “supplement” arouses this outcry! BlackRock is an obvious target because it is the largest management company in the world. But this opportunity opened up by the Pacte law in terms of supplementary pensions will certainly not be the prerogative of BlackRock. All asset management players hope to position themselves, we are no exception.
What are your market bets for 2020?
The dollar is expected to depreciate, which will be a positive factor for emerging markets. The tech sector should continue to perform well on the stock market, especially if the likelihood of the election of Democratic candidates, Elizabeth Warren and Bernie Sanders, in favor of dismantling the Gafa, is reduced. However, I don’t believe 2020 will be as good a year as 2019 for stocks.
The heights reached last year surprised everyone.
Yes, it is interesting. No one believed it. Risk aversion remains the dominant sentiment. The success of the film “Joker” symbolizes in a way the state of mind of our time: the sad clown, the loss of illusions, despair. We are immersed in an atmosphere of the end of the cycle, both financial and cultural. Thus, ecology, the bearer of solidarity and major growth opportunities, is most often associated with a rejection of technological advances which nevertheless offer the best bulwark against the threat of global warming. We forget that there are ultimately few conflicts in the world today, that technology also frees up time, that life expectancy increases …
Are climate change and social and environmental investment – ESG – taken into account in your management?
It has been a long time since we no longer invest in armaments, tobacco and in companies with questionable governance. Some of our funds are already compliant with national ESG labels. We are close to developing our proprietary ESG analysis system to which all of our main funds will have to comply by next spring.
Activists are frightening in France and efforts to limit their influence are increasing. What do you think of this debate?
In France, we have a tradition of Colbertist capitalism, where the state supports the status quo and where business leaders graduate from the same schools as ministers. This generates a form of cultural inertia which makes it difficult to accept activism. However, if activism ensures that companies are better managed, if it promotes better consideration of shareholders and society in general, then yes I defend it. As it seems to me essential to defend the minorities in the takeover bids.
What does the CapGemini Altran case inspire you in this regard? [Depuis, CapGemini a relevé son prix.]
The higher price requested by Elliott to value Altran does not seem excessive to our European managers.
Do you think short selling is a bad practice?
No, we practice this strategy, even if we are essentially “long” – positioned to buy. Short-selling brings liquidity to the market. This forces companies that are asleep or taking questionable headings to correct the situation. To present activists as vultures is a bad trial. Asset managers are there to make the best possible allocation of the capital entrusted to them and they can help businesses be better managed and more competitive.
The practice of securities lending and borrowing is also criticized. Do you lend your titles?
In a marginal way, and always for the sole benefit of our customers.