Fitch Rates 2 SSgA Alpha Equity Funds 'Strong' Fund Quality

Mon Apr 14, 2014 12:07pm EDT

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(The following statement was released by the rating agency) PARIS, April 14 (Fitch) Fitch Ratings has assigned SSgA EMU Alpha Equity Fund and SSgA Europe Small Cap Alpha Equity Fund 'Strong' Fund Quality Ratings. The funds are managed by State Street Global Advisors (SSgA). KEY RATING DRIVERS Funds Presentation SSgA EMU Alpha Equity Fund is a French SICAV with EUR197m of assets at end-March 2014. It invests in eurozone equities and is aimed at outperforming the MSCI EMU Index by 3 to 5% with a tracking-error target of 2% to 4%. SSgA Europe Small Cap Europe Alpha Equity Fund is a French law investment fund (FCP) with EUR44m of assets at end-March 2014. It invests in European small capitalisation equities, and seeks to outperform the MSCI Europe Small Cap Index by 3%, while limiting its tracking-error target to 5%. Both funds follow an active, systematic investment approach relying on quantitative model inputs. They are managed with tight deviation limits relative to their benchmarks, avoid capitalisation bias, and seek a beta close to one. Bottom-up stock selection drives the funds' performance. Investment Process SSgA's quantitative models, based on specific attributes of individual companies, allow a consistent, systematic assessment of a vast universe of companies, identifying those that are attractively valued and with growth prospects. This is complemented by a dynamic top-down approach to fine-tuning the portfolio's positioning. SSgA's strong quantitative governance practices and resources support model developments and enhancements. Portfolio construction is disciplined and builds diversified portfolios of small active stock positions, drawing on an optimisation model that combines the model's stock ranking with risk constraints and transaction costs consideration. Proposed trades are then reviewed by the lead portfolio manager (PM) against recent news flows that may not have been captured by the model. Resources The experienced lead PM of the two funds is supported by a well-resourced active European equity team, comprising seven PMs and six quantitative research analysts. Investment resources are solid, including a global trading desk and an investment risk team of 16. The funds benefit from SSgA's operational and risk control framework. The IT environment is built around third-party systems, supporting well-controlled, efficient workflows. Track Record The funds have achieved sound track records, relative to their respective benchmarks and peers over the long-term. SSgA EMU Alpha has outperformed the index by 15.8% over 10 years to March 2014 and achieved a Lipper Leader score for Consistent Return of '5'. The macro-driven market environment in 2011 was detrimental to the quantitative model, which has subsequently been completed with a top-down component. SSgA Europe Small Cap Alpha delivered a return of 210.8% over five years to March 2014, outperforming the Lipper Equity Europe Small&Mid Cap category by 48.7%, and its reference index by 11.9%. The fund's reference index was the S&P Small Cap Europe Index until October 2013, when it switched to the MSCI Small Cap Europe Index (the latter index has returned 215.2% over five years to end March 2014). The fund has achieved the highest Lipper Leader of '5' over three, five and 10 years to February 2014, and is among the best performing quintile in its Lipper peer group over the same periods, as well as since its inception in 1998. Asset Manager SSgA is the asset management arm of State Street Corporation (A+/Positive/F1+). It is a global asset manager with USD2.34trn in assets under management at end-2013, including USD3.8bn in active quantitative European equities. RATINGS SENSITIVITIES The ratings 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 ratings. For example, this may be manifested in significant structural deterioration in the funds' performance, excessive risk deviation from objectives, or substantial turnover in the investment team. Key person risk is limited for these funds, but model risk exists. 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 Francois Vattement, CFA Associate Director +33 1 44 29 92 75 Fitch France S.A.S. 60 rue de Monceau Paris 75008 Secondary Analyst Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Committee Chairman Manuel Arrive, CFA Senior Director +33 1 44 29 91 77 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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