Fitch Publishes Tikehau Credit Plus 'Strong' Fund Quality Rating

Wed Jan 29, 2014 10:22am EST

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Tikehau Credit Plus here PARIS, January 29 (Fitch) Fitch Ratings has published Tikehau Credit Plus ‘Strong’ Fund Quality Rating. The fund is France-domiciled and managed by Tikehau Investment Management (Tikehau IM). KEY RATING DRIVERS Fund Presentation Tikehau Credit Plus is a French Fonds Commun de Placement (FCP) with EUR168m of assets at end-December 2013. It is a defensive flexible credit fund primarily invested in eurozone high-yield (HY) bonds (typically 70%) and with a performance target of close to the average HY market yield over the medium term with lower volatility. Investment Process In Fitch’s view, the fund’s investment edge is its ability to select under-researched issuers and actively adjust its market exposure. This is achieved through flexible use of cash (up to 25% historically), optional protection strategies, and dynamic allocation between HY and investment-grade bonds. Proprietary credit research is comprehensive, covering fundamental, relative value and liquidity factors. Coverage focuses on under-researched, more complex credits to optimise use of internal analytical resources. Portfolio construction is not benchmark-constrained but must adhere to the beta-based risk budget defined at portfolio level and for each portfolio bucket during weekly top-down meetings. The fund’s dynamic risk-based asset allocation approach therefore allows active management of its HY market beta (varying between zero and 1.2). Resources The fund’s seasoned lead portfolio manager is supported by a small but focused credit team, comprising four credit analysts, one quantitative specialist and a more junior PM. In addition, the head of the credit team, who joined a year ago, has expertise in analysing credit market directional trends. Research resources are allocated opportunistically across sectors due to the small size of the team. The fund also benefits from Tikehau IM and Tikehau Group resources in operations and controls. Sophis Value and Bloomberg offer full coverage of portfolio monitoring, order management, analytics and compliance checks. Track Record The fund has achieved a sound track record, delivering a performance of 25.5% over three years to end-December 2013 with a lower volatility than the Bank of America Merrill Lynch Euro High Yield Index. It has structurally lower beta and volatility than peers in the Lipper category because of the nature of its flexible mandate; this also means that the Lipper Leader score for Consistent Return is not relevant to the fund. The fund is vulnerable to periods of spikes in volatility, credit defaults and illiquidity of some segments of the asset class, among others. Asset Manager Tikehau IM was established in 2006 as a France-domiciled asset manager specialising in eurozone credit and debt investments. It is part of the Tikehau group, created in 2004 and led by four partners. At end-2013 Tikehau IM employed 34 staff and was managing EUR2.3bn of assets. The sharp increase (+219%) in assets managed by Tikehau IM over the past two years helped strengthen the asset management platform. RATING SENSITIVITIES The rating may be sensitive to material changes in the investment or operational processes, or in resources dedicated to the fund. A material adverse deviation from Fitch's guidelines for any key rating drivers could result in a downgrade of the rating. For example, this may be manifested in significant structural deterioration in the fund's performance, an excessive risk deviation from objectives, or the departure of the lead portfolio manager or the head of credit investment. Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company. Fitch's Fund Quality Ratings offer an independent, forward-looking assessment of a fund's key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks. The ratings focus on the fund manager's investment process, key fund performance drivers, risk management, and the quality of the fund's operational infrastructure. For more information, please see www.fundmanagement.fitchratings.com To receive forthcoming Fund Quality Rating research, opt in here Contacts: Primary Analyst Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Fitch France S.A.S. 60 rue de Monceau Paris 75008 Secondary Analyst Manuel Arrive, CFA Senior Director +33 1 44 29 91 77 Committee Chairman Aymeric Poizot, CFA, CAIA Managing Director +33 1 44 29 92 76 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Fund Quality Rating Criteria', dated 19 September 2011, are available at www.fitchratings.com. Applicable Criteria and Related Research: Fund Quality Ratings Criteria: Assessing Funds’ Investment Processes and Operational Attributes here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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