(Repeat for additional subscribers)
Jan 23 (The following statement was released by the rating agency)
Fitch Ratings has assigned Parvest Diversified Dynamic a 'Strong'™ Fund Quality Rating. The
fund is Luxembourg-domiciled and managed by THEAM, a member of BNP Paribas Investment Partners
KEY RATING DRIVERS
Parvest Diversified Dynamic is a sub-fund of the Parvest Luxembourg SICAV with
EUR65m of assets at end-December 2013. Launched in 1997, the fund was managed
under a traditional balanced strategy until December 2009, when it switched to
the current flexible multi-asset and quantitative model-driven investment
approach. The fund targets 7.5% volatility with a stable risk budget allocation
across asset classes while keeping leverage below 150%.
The funda€™s central assumption is that volatility is a robust indicator of market
direction. Its capital-weighted asset exposure is adjusted according to
pre-defined risk allocation targets and assetsa€™ volatility so that the funda€™s
overall volatility remains broadly stable. The risk budget target was defined
following a thorough back-testing process. The fund would nevertheless be
challenged in achieving its target should model assumptions prove unstable over
a prolonged period.
Portfolio construction closely follows rebalancing signals from a proprietary
quantitative model. The fund is typically invested in a low number of
securities, primarily exchange-traded funds (ETFs) and futures, covering global
equity, fixed income, commodities and real estate markets. Constraints on
leverage at portfolio and asset class levels provide effective risk control,
preventing excessive exposure to any one asset class.
The fund is managed by two experienced absolute return portfolio managers. BNPP
IPa€™s centralised financial engineering department provides quantitative
research, and quantitative model development, back-testing and maintenance that
underpin the portfolioa€™s strategy. The operational and IT environment built
around Sophis Value and Excel add-ons provides for efficient workflow, matching
the needs of the fund, and is scalable and well-integrated.
The fund has achieved a Lipper Leader score of four over three years. It has
behaved, on average, in line with its volatility objective and delivered lower
drawdowns (peak to trough value declines) and better Sharpe ratios
(risk-adjusted performance measure) than traditional balanced strategies.
Established in 2011 and fully owned by BNPP IP ('Highest Standards' rated by
Fitch), THEAM, the fund manager, is dedicated to indexed, active systematic,
guaranteed and liquid alternative products. BNPP IP managed EUR478bn of assets
in total at end-September 2013. For more information on BNPP IP and THEAM, see
Fitch's asset manager rating report dated 17 December 2013.
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 or a material deviation from the
volatility objective of 7.5%. Key person risk is limited for this fund, but
model risk exists. Model error or inability to adapt to changing market
conditions may also put pressure on the 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
To receive forthcoming Fund Quality Rating research, opt in at
Link to Fitch Ratings' Report: Parvest Diversified Dynamic