Thu, 09/01/2014 - 15:05
Amundi is broadening its minimum variance expertise, which currently includes a Europe and global fund range, with the launch of Amundi Funds Equity Emerging Minimum Variance.
The new UCITS IV compliant sub-fund of the Luxembourg SICAV Amundi Funds seeks to outperform, over an investment horizon of five years, the MSCI Emerging Markets NR Close index, while trying to keep a level of volatility lower than that of the index.
The sub-fund takes an original approach in offering a solution that is tailored to the needs of investors seeking to limit the overall risk level of an equity portfolio. At least two thirds of the assets are invested in equities and equity-linked instruments of companies situated in emerging countries of Europe, Asia, America and Africa.
Emerging markets currently offer attractive opportunities with return potential over the long term, but tend to be more volatile over the short term. Risk management is therefore of the essence. In this environment, the minimum variance process, which places risk at the heart of the investment process, can offer a pertinent investment solution.
Melchior Dechelette, the fund manager of Amundi Funds Equity Emerging Minimum Variance, says: “Risk, together with fundamental criteria such as balance sheet strength and profitability, is the main contributor to the construction of the portfolio. With this approach, investors are expected to be less affected by equity risk. Amundi Funds Equity Emerging Minimum Variance enables investors to benefit from the upside potential of emerging equity markets with less exposure to volatility.”
In order to meet the dual objective of increasing performance and reducing volatility, the investment team implements a rigorous investment process based on a triple analysis:
- Quality stock selection: The investment team performs a multi-criteria analysis based on companies' balance sheets and income statement data. After applying a liquidity filter, it seeks to exclude the stocks with poor fundamental quality from the investment universe.
- Quantitative optimisation process: The investment manager implements a quantitative optimisation process on the reduced list of stocks so as to build a portfolio with low volatility. This procedure integrates constraints on the stock, sector and country weighting, as well as exposure to certain risk factors.
- Risk factor exposure management: The investment manager verifies that the optimised portfolio is not strongly exposed to risk factors with highly asymmetrical behaviour.
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