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May 12 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Parvest Equity Best Selection Euro, a fund managed by BNP Paribas Investment Partners (BNPP IP), a ‘Strong’ Fund Quality Rating.
The ‘Strong’ rating reflects the fund’s highly documented investment approach, which is supported by in-depth research and portfolio management resources and has demonstrated a solid track record. In Fitch’s view, the fund is differentiated from its peers by the depth of its research, its industry focus, its peer decision- making process and its risk discipline.
Parvest Equity Best Selection Euro is a sub-fund of the Parvest Luxembourg SICAV. Launched in May 2004, it is a long-only European equities fund of EUR1.02bn as at 30 April 2014.
The fund’s active, long-term investment approach with a three- to five-year holding period is based on bottom-up fundamental stock-picking. The fund is fully invested, and has a quality mid- to large-cap growth bias but no sector bias.
BNPP IP’s proprietary research differentiates itself from peers by its industry focus, its depth of analysis and a degree of formalisation. Analysts’ recommendations are challenged in a peer-review process. Investment decisions are then made by the whole European equity team through consensus. Risk budgeting drives portfolio construction: active share (i.e. the portion of the portfolio that is not benchmark replication) is kept above 70%. Stock-specific factors are maintained at above 50% of total risk. Each source of common risk factors is capped at 10% of total risk.
The stable European equity team consists of 10 portfolio managers (PMs)/analysts, who each have 20 years’ experience on average. In addition to BNPP IP’s deep, shared risk management resources, the team benefits from a dedicated risk manager, making full use of third-party equity risk analytics.
The fund has demonstrated a long-term, strong, consistent risk-adjusted performance, outperforming its category and benchmark (MSCI EMU) by 28.7% and 18.7% respectively over five years. In 2013 and year-to-date, the fund has suffered from its growth quality bias, as value stocks outperformed.
BNPP IP (rated ‘Highest Standards’ by Fitch) is the asset management arm of BNP Paribas banking group (A+/Stable/F1). BNPPIP had EUR10.6bn of European equities under management at end-March 2014.
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 of the rating. For example, this may be manifested in significant structural deterioration in the fund’s performance. Fitch sees limited key person dependency in the team, so the departure of a PM is unlikely to affect the rating.
Conversely, an upgrade could result from demonstrated outperformance relative to peers and the benchmark in a sustained period of unfavourable market conditions, such as that characterised by the outperformance of low-quality, value stocks.
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: Parvest Equity Best Selection Euro