Main funds (assets)
Patrimoine ($26.7 billion), Investissement ($9.3 billion)
Five-year cumulative return
Patrimoine: 60.2%, Investissement 90.2%
On Sunday Mar. 8, 2009, fund manager Edouard Carmignac was wandering in a rice paddy near Chiang Mai, Thailand, doing some sightseeing after two weeks visiting companies in Asia. Equity markets around the world had tumbled to their lowest point in 13 years. "Markets were in absolute despair," Carmignac, 62, says. "The weekend newspapers were predicting the end of stocks. It was too good to be true."
In the following days, his Paris-based firm, Carmignac Gestion, poured more than $6.8 billion into stocks, the maximum it could invest under its charter. The timing was perfect: The market rebound started that very Monday. Carmignac Investissement, his $9.3 billion all-equity fund, posted a 42.6% return for 2009, vs. 27.4% for the MSCI AC World Index. The firm's biggest fund, the $26.7 billion Carmignac Patrimoine, which mixes stocks and bonds and avoided a loss in 2008, notched a 17.6% gain in 2009, vs. 13.4% for its Morningstar (MORN) benchmark.
Those spectacular numbers have made Carmignac a money magnet. Last year, Patrimoine drew $14.2 billion from investors, more than any fund except Bill Gross' PIMCO Total Return, according to fund researcher Strategic Insight. Overall, Carmignac Gestion tripled its assets under management, to $54 billion, and expects to reach $68 billion this year. "It takes balls and brains to be good at this job," Carmignac says, reflecting on the move that paid off so richly.
Paintings by Roy Lichtenstein, Keith Haring, Jean-Michel Basquiat, and others decorate the walls of Carmignac's office, which is on the Place Vendôme in Paris, between jewelers Van Cleef & Arpels and Boucheron. "The world has always been my natural playground," says Carmignac, who as a child lived in Peru and got his MBA at Columbia University. "Of course, if we don't understand [an investment], we stay away."
Carmignac, who still owns about 70% of the firm he founded in 1989, has long followed a "top-down" investment strategy. He looks for sustained economic trends, then makes concentrated bets on sectors and companies that stand to benefit from them. He also uses derivatives such as options on indexes to hedge portfolios in difficult times and change gears quickly in rebounds—as he did last year.
Today, more than half the firm's money is in emerging-markets stocks and commodities; recent purchases include China Construction Bank and All América Latina Logística, Brazil's biggest railroad operator. The rest is mostly invested in U.S. stocks, including Freeport McMoRan Copper & Gold (FCX) and MasterCard (MA), a play on the economic revival.
Carmignac looks up at the giant Warhol portraits of Lenin and Mao hanging on either side of his desk. "They are here to remind me," he says, "never to take anything for granted."