(Repeat for additional subscribers)
April 8 (The following statement was released by the rating agency)
Fitch Ratings has assigned LO Funds - Absolute Return
Bond Fund (ARBF) a 'Strong' Fund Quality Rating. The fund is managed by Lombard
Odier Investment Managers (LOIM).
KEY RATING DRIVERS
ARBF is a sub-fund of LO Funds, Lombard Odier's Luxembourg SICAV which is UCITS
IV compliant. Launched in July 2010, ARBF is a fixed income absolute return fund
with EUR282m of assets as of February 2014. The fund aims to generate returns of
cash plus 4% over a cycle with a target volatility of 5%. The fund can invest
both long and short, across developed and emerging markets, predominantly in
cash bonds and derivatives.
The portfolio consists of a macro book (run by the two co-lead PMs) to reflect
the team's top-down views, combined with five sub-portfolios that are run
independently by five individual PMs. Each of the five PMs has a specialised
area of investment.
The fund's flexibility to dynamically allocate risk between alpha drivers is a
key differentiator to peers. Risk budgets are allocated to each book, in terms
of volatility limits and stop-loss limits (rolling over a range of time
periods), and are monitored by LOIM's independent risk team to limit fund
The global fixed income and currencies team consists of seven members. The lead
PM, Gregor Macintosh, has run the fund since inception and has 18 years'
investment experience. The co-lead PM, Grant Peterkin, joined LOIM in March
2013, with 15 years' experience. The team have on average 13 years' investment
experience. The fund is supported by LOIM's infrastructure, notably three
independent investment risk managers specifically involved in this fund and
LOIM's central functions, including IT and middle office.
The fund (EUR IA share class) has a Lipper Leader Score for consistent return
and capital preservation score of '4' and '5', respectively, over three years to
end-February 2014. Since inception, the fund has returned 8.5% compared with the
Lipper Global Absolute Return EUR Low category of 3.8%. The performance of the
fund since inception has been predominately driven by the macro risk book.
LOIM is the asset management division of the Swiss private bank Lombard Odier
SCA (AA-/Stable/F1+). The company managed USD48bn as at December 2013, including
USD18bn in fixed-income products. The infrastructure is well suited to the
The rating may be sensitive to material changes in the investment or operational
processes, or resources dedicated to the fund. A material adverse deviation from
Fitch's guidelines for any key rating driver could result in a downgrade. For
example, this may be manifested in a structural deterioration in the fund's
performance as measured by drawdown, excessive volatility or underperformance
relative to objective and peers. Fitch considers there is currently limited
potential for a positive rating action due to the fund's already high rating.
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
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Link to Fitch Ratings' Report: LO Funds - Absolute Return Bond Fund