(The following statement was released by the rating agency)
Jan 28 - Fitch Ratings has placed LFP Europe Alpha’s ‘Satisfactory’ Fund Quality Rating under review. The fund is France-domiciled and managed by La Francaise des Placements.
The fund’s performance deteriorated in 2012, mainly in H2, penalised by its sector rotation and market timing bets. Fitch will monitor how the process is adjusted to strengthen market timing and improve return consistency. The agency expects to resolve the “under review” status of the funds after six months.
LFP Europe Alpha (I share class) returned 7.23% over the year to 31 December 2012, underperforming its benchmark (the DJ Stoxx Europe 600) by 10.95%, and its Lipper category “Equity Europe” by 10.42%. Most of this relative underperformance materialised during Q312, during which the fund neutralised its exposure to the banking sector and partially hedged its equity exposure by September. Over five years, the fund is back in line with its category, losing its previously captured alpha and achieving a Lipper Leader score for consistent return of 1 over three and five years.
The fund’s stock picking results from a scoring process developed in 2006 that rank companies on four equally-weighted criteria (Valuation, Quality, Growth, and Momentum). Combined with qualitative views, scores are reviewed during committees involving the whole equity team. While top down decisions driven by house views are important in all the funds managed by LFP, the portfolio manager has ultimate judgement on stock selection, sector rotation and market exposure. The fund invests in all market capitalisations, without style bias, themes or benchmark constraint, and tactically manage its market exposure (from 60% and 110%) using futures.
LFP Europe Alpha is a long-only, stock-picking European equity fund, with EUR63m of assets at end-December 2012, seeking to outperform the DJ Stoxx 600 index. Created in 2007, the fund was rebranded in January 2012 and its former “thematic approach” (competitive advantages) removed, without change to the underlying investment process.
La Francaise AM is an asset management group, 85.9% owned by Credit Mutuel Nord Europe (a euro-regional bank mainly present in northern France with branches in Belgium (BKCP) and Luxembourg (UFPB)). The group managed EUR35bn as of June 2012, through La Francaise Real Estate Managers and La Francaise des Placements (rated ‘M2’ by Fitch).
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.fitchspotlight.com/FQR.
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