Amundi Funds Equity Statistical Arbitrage (EUR) Long Short Strategy on Global Equities Alexandre Drabowicz, Julia Kung Product Specialists Citywire Montreux 11 - 13 May 2011 This material is solely for the attention of “professional” investors (see more details and definitions at the end of the presentation).
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Amundi Funds Equity Statistical Arbitrage (EUR)
Long Short Strategy on Global EquitiesAlexandre Drabowicz, Julia Kung
Product Specialists
Citywire Montreux 11 - 13 May 2011
This material is solely for the attention of “professional” investors (see more details and definitions at the end of the presentation).
Citywire Montreux - May 2011 - page 2
Investment Case: Absolute return UCITS
Amundi Equity Arbitrage team
Investment team run by Olivier Avertin since 2007
Investment process implemented in January 2008Eurohedge Awards 2008 nominee under new fund of the year 1
Assets under management: EUR 231 million
Strong expected growth in Absolute Return
Flows in 2011: + € 140 billion expected 2
55% of investors willing to increase their L/S equity allocation 2
Significant demand for Long/Short Equity strategy
Wide offer on European Long/Short equity but smaller offer on the Global Long/Short equity universe
Amundi Funds Equity Statistical Arbitrage (EUR) is a global market neutral sub-fund
1 Source: EuroHedge for the French domiciled fund 2 Source: Deutsche Bank, February 2011
Citywire Montreux - May 2011 - page 3
Amundi Funds Equity Statistical Arbitrage (EUR)
Behavioural finance
High & daily
High volatility / Dispersion
Investment Universe
Performance Driver
Turnover
Cyclicity of Alphas
Large caps1 with high liquidity
Source: Amundi, as of 31/03/2011- Given for illustrative purpose only1 Current capitalization applied. Please note that no restriction in terms of capitalization exists in the Prospectus. Accordingly, this allocation on Large cap may be changed without prior notice to another capitalization2 Current investment universe, may be changed without prior notice, please refer for further details about universe to the prospectus of Amundi Funds
Performance objective : Eonia +4%
Volatility (Ex post) Target: 4-6%
A UCITS III sub-fund with daily liquidity
US and European equities universe2
Strategy with low to zero correlation with major assets classes
An attractive addition to a portfolio due to diversification and decorrelation benefits
Simple portfolio construction with an active risk management
A real Market Neutral Portfolio
Amundi Funds Equity Statistical Arbitrage (EUR)
Launch date: December 2008
AUM :€127M
Citywire Montreux - May 2011 - page 4
Table of contents
1. Investment process
2. Investment decisions: examples
3. Key Benefits
4. Performance
Citywire Montreux - May 2011 - page 5
Mean Reverting:“Selling outperformers & buying laggards”
– To achieve the objective, three categories of strategies may be used: systematic stock picking strategy, global macro strategy, tactical alpha strategy
Universe
– US & European equities1 – Performance swaps (CFD) and futures to implement short positions
Performance engines– Behavioural finance: arbitrage mispricing in price or return– Dynamic allocation between momentum and mean reverting adapted to market structure– Active management of risk to keep stable volatility
Equity universe
Sell
outperformers
Sort by mid term performance criteria
Buy
underperformers
Buy of equities with high momentum
Sort by mid term performance criteria
Momentum:“Trend Following”
Given for illustrative purpose only1 Current investment universe, may be changed without prior notice, please refer for further details about universe to the prospectus of Amundi Funds
Citywire Montreux - May 2011 - page 6
Step 2Dynamic
allocation
Step 3Risk
monitoring
Discretionary Risk Hedging
Relative weighting of each strategy according to the market
structure
Global Long Short market neutral portfolio
Risk concentration analysis
Amundi Funds Equity Statistical Arbitrage (EUR) final portfolio
Step 4Discretionary
hedging
Step 1Systematic
stock-pickingMEAN REVERTING strategy
Long Short portfolio ± 250 positions
Investment universe: 1,000 stocks
MOMENTUM strategy
US stocks1 European stocks1
MEAN REVERTING strategy MOMENTUM strategy MEAN REVERTING strategy MOMENTUM strategy
Investment process
Given for illustrative purpose only1 Current investment universe, may be changed without prior notice, please refer for further details about universe to the prospectus of Amundi Funds
Citywire Montreux - May 2011 - page 7
80% MR 20% MOM
80% Momentum20% Mean Reverting
50% Momentum50% Mean Reverting
Low volatility & dispersion High volatility & dispersion
1 3
2
Different levels of risk allocation adjustment:
3
1
2
A dynamic allocation based on systematic market monitoring
Given for illustrative purpose onlySource: Amundi. The “Dispersion & Volatility Indicator” tool is used by the management team on an indicative basis only Past behaviours do not prejudge future behaviours
The risk allocation between Mean Reverting and Momentum strategies is driven by the Volatility & Dispersion Indicator
Given for illustrative purpose onlySource: Amundi. The “Dispersion & Volatility Indicator” tool is used by the management team on an indicative basis only Past behaviours do not prejudge future behaviours
Early 2008: change of market structure Dynamic allocation: switched to 80% mean reverting (MR) in Europe in Feb’08, U.S. May’08
Rigorous implementation of signal: market structure more adapted
New allocation allowed for stronger performance vs. a balanced 50-50 Momentum/MR (+150 bps)
Feb08: Europe Switch to MR
May08: US Switch to MR
Volatility and Dispersion indicator
Citywire Montreux - May 2011 - page 10
2008: special market, special year
Source: Amundi, Bloomberg, * Based on French Domiciled fund Given for illustrative purpose onlyPast behaviours do not prejudge future behaviours
September 2008: deleveraging prior to Lehman Strategy records abnormal daily returns: warning signal
High correlation with Top/Down axis: warning signal
Very low stock picking contribution due to high correlation between individual stocks
Decision to reduce overall leverage by 3
Portfolio downsizing implemented in a single session
Drawdown experienced limited to -3.63% *, 3 times more potentially if leverage was kept constant
Unusual daily returns
Citywire Montreux - May 2011 - page 11
2009: difficult market conditions
Source: Amundi, Bloomberg, Distribution of monthly rolling returns- weekly data from January 2008 to December 2009Given for illustrative purpose onlyPast behaviours do not prejudge future behaviours
Balanced risk allocation but extreme market behavior Dynamic allocation switched to 50-50 in Q3 2009 (U.S.) and Q4 2009 (Europe)
Equity markets experienced a 60% bounce: 1% probability since 1970
Under-estimated the market rally, no hedging was effective
Statistical arbitrage models are not calibrated for extreme market behavior
Average Strategy Performance against MSCI World Average Performance
Source: Amundi, BloombergGiven for illustrative purpose onlyPast behaviours do not prejudge future behaviours
Volatile markets not favorable for spotting trends
Stocks that had strongest falls in 2008 were the ones which rebounded most in Q1 2009
Market bounce too strong for mean reverting strategies to be effective
In 2009, mean reverting was only effective beyond 6 months (vs. 1-3 months in “normal” markets)
In 2009, momentum was only effective over 3 months (vs. 6-12 months in “normal” markets)
Example on Peugeot/Daimler intra-sector trade shows challenging trading horizons
Mean Reverting behavior over 6 months: no momentum visible
Momentum behavior very short term, no mean reverting taking place short term
2008 2009
Citywire Montreux - May 2011 - page 13
Table of contents
1. Investment process
2. Investment decisions: examples
3. Key Benefits
4. Performance
Citywire Montreux - May 2011 - page 14
Ability to control volatility of returns
Jan’08: Implementation of the new investment process - Given for illustrative purpose onlySource: Amundi, as of 31/03/2011 Past performance is not indicative of future results
Since implementation, despite volatility in equities more than tripling, sub-fund’s volatility has remained stable, in line with its volatility target
Statistical Arbitrage strategy shows low correlation with equities, bonds, commodities and hedge funds
Asset Class Correlation
World Equity Index MSCI World 0.01
Global Bond Index JP Morgan GGB -0.07
Commodity Index S&P GSCI Tot Return -0.08
Hedge Fund Equity Index HFRX Equity Market Neutral 0.02
Hedge Fund Index HFRX Global Hedge 0.09
Volatility CBOE SPX Volatility Index -0.05
Currency Euro Spot -0.11
Source: Bloomberg, using French domiciled fund as of Dec 27, 2007 to March 31, 2011Correlation based on weekly data. Past performance does not prejudge future results, nor is it a guarantee of future returns
Citywire Montreux - May 2011 - page 16
Complementary with the Volatility funds
Source: Amundi. Performance figures are net of fees on I share (institutional investors)As of end of March 2011- Past performance is not indicative of future results
Source: Performance figures are net of feesPast performance is not indicative of future resultsPlease refer for further details to the prospectus of Amundi Funds
Performances 2010-2011
For Amundi Funds Equity Statistical Arbitrage (EUR) sub-fund, moderate/low volatility regimes are favorable
For volatility, fall of volatility below the mean and low volatility environments are not favorable
Overall, a good fit: Q1-Q3-Q4 are good for Statistical Arbitrage, Q2-Q3 for Volatility
Strategy
Performance
Statistical Arbitrage
Drivers
Performance
Volatility World
Drivers
Q1 2010 +2.47% Momentum models -1.72% Falling volatilities and long vega
Q2 2010 -0.83% Contrarian models hit as sell off was too aggressive +6.53% Brutal change in risk appetite
Q3 2010 +3.13% Momentum & Mean reverting benefit from lower correlation +1.38% Volatility of Volatility
Q4 2010 +1.14% Momentum models perform best -0.99% Falling volatilities and long vega
Q1 2011 +1.69%Mean-reverting models contributing more than momentum
+0.80% Volatility declining, but good opportunities for trading in March
Sources: Amundi, Bloomberg data as of 31/03/2011 Past performance is not indicative of future results.*Composite Absolute Return: Equity Statistical Arbitrage, gross performances, since 31/12/2007 **HFRX Equity Market Neutral Index is a benchmark of hedge fund equity market neutral strategies performance, used here for comparison purposes *** Compounded EONIA (O.I.S.) (360 basis) is the strategy official benchmark
1yr volatility 3.79%
Best month+2.96%July 2008
Worst month-2.46%
Nov 2009
Composite Asset €194,28 million
COMPOSITE Equity Statistical Arbitrage
EONIA***
HFRX EMN**
Launch date of Amundi funds Equity Statistical Arbitrage (EUR) : 09/12/2008
Citywire Montreux - May 2011 - page 20
Calendar year performance
Source Amundi, Share class IE (Institutional investors) Capitalisation in Euro; Net performance; Data as of 29 April 2011Past performance does not prejudge future results, nor is it a guarantee of future returns
Portfolio Volatility 5,27% 3,03% NAReference Indicator Volatility 0,07% 0,02% NAEx-post Tracking Error 5,26% 3,03% NAPortfolio Sharpe Ratio -1,43 1,83 NA
Citywire Montreux - May 2011 - page 21
Performance against main Equity Market Neutral funds
Source: BloombergJan’08: Implementation of the new investment process *Using French Domiciled fund – as of 31/03/2011Past performance is not indicative of future results
Performance shows that we rank favorably against the largest competitors
French Domiciled fund HFRX Equity Market Neutral IndJPM INV-HIGH STAT MAR N-I€-A MLIS-MARSHALL WAC TP U F-€AACARMIGNAC PT-MARKET NEUTR-A EXANE GULLIVER FUND-IALPHAGEN CAPELLA FUND LTD-B
Citywire Montreux - May 2011 - page 22
Equity Arbitrage: Absolute UCITS Rankings
Source: HedgeFund Intelligence, as of end of December 2010Past performance is not indicative of future results1Dédicated Sicav
First quartile in 2010 and over the last 6-month period
Citywire Montreux - May 2011 - page 23
Conclusion
Market Neutral portfolio on Global equities
Robustness of the process
A process that has delivered performance to rival the “big names” in Equity Market Neutral over the last 3 years1
Best environments to be in a market neutral product
Source: Amundi, assets and organisation as of 31/03/20111Past performance is not indicative of future results
An attractive strategy to benefit from inflows into the equity markets. These inflows should result in greater dispersion, which should generate decent performance for the strategy.
– Mr. Avertin joined Amundi Paris in April 2007 as Global Equity and Absolute return portfolio manager. He was formerly proprietary trader at Exane for 8 years, managing absolute return quantitative stock picking and discretionary global macro strategies.
– Mr. Avertin holds a postgraduate degree in Finance from IEP (Institute of Political Science Paris) in 1996. He also holds a postgraduate degree in Applied Mathematics from the University of Paris Dauphine in 1995.
Dave Benichou - Portfolio Manager, Equity Arbitrage– Mr. Benichou joined Systeia in June 2001 part of Amundi Group, as an Equity Analyst
and Trader for the Systematic & Statistical Arbitrage Desk. In 2005, he expanded his career as a Portfolio Manager where he implemented long term Quantitative Factor Trading Strategies. In July 2008, he joined Amundi Paris to manage an Equity Market Neutral Fund.
– Mr. Benichou received a postgraduate degree in Banking & Finance from Sorbonne University in 2001 following his Master’s Degree in Mathematics & Economics from Nice Sophia-Antipolis.
Xavier Deheul – Deputy Portfolio Manager, Equity Arbitrage– Xavier has a double education with a Computer Sciences Engineer Master Degree in
2001 and a Wealth Management Master Degree in 2007. He started his career as IT developer for the Credit Lyonnais Asset Management and became Risk Manager in 2004 for Natixis Asset Management. He joined Systeia as head of Risk Management in 2007 and recently became Portfolio Manager in the new Amundi front office team.
Source: Amundi, data as of May 2011
Citywire Montreux - May 2011 - page 25
Amundi Funds Equity Statistical Arbitrage (EUR): Key information
AE(All investors)
IE(Institutional inv.)
SE 1
(Distributors)
Management company Amundi Luxembourg S.A.
Investment manager Amundi
Custodian CACEIS Bank Luxembourg
Reference currency of the sub-fund
EUR
Reference currency of the class EUR EUR EUR
Share categories Accumulation / Distribution Accumulation / Distribution Accumulation
ISIN Code A: LU0401972657 D: LU0401972731
A: LU0401972657 D: LU0401972731
A: LU0401972814
Minimum initial subscription None Equivalent in EUR of USD 500,000 None
Frequency of NAV calculation Daily
Cut off for dealing times Luxembourg dealing days before 2pm (Luxembourg time) 2
Maximum subscription fee 4.50% 2.50% 3.00%
Maximum annual management fee
1.10% 0.60% 1.50%
Maximum annual administration fee
0.30% 0.20% 0.30%
Performance fee 30% max. per year of the performance above the performance objective (EONIA + 4.00% after charges)3
Maximum conversion fee 1.00%
Maximum redemption fee None
Not all share classes and, as the case may be, share categories are registered for sale in all countries. Investors may contact Amundi
Luxembourg for further information.
1 All investors. Shares only available through a network of distributors specifically authorised by the Board of Directors.
2 Or, as the case may be, an earlier cut off time applicable by the relevant distributor.
3 A detailed explanation of the performance fee is provided in the Prospectus.
Citywire Montreux - May 2011 - page 26
Amundi Funds
This document contains information about Amundi Funds Volatility Euro Equities, Amundi Funds Volatility World Equities, Amundi Funds Dynarbitrage Volatility and Amundi Funds Equity Statistical Arbitrage (EUR), each of them refers to as the “Sub-Fund” and collectively as the “Sub-Funds”), the sub-funds of Amundi Funds (the“SICAV”), an undertaking for collective investment in transferable securities existing under Part I of the Luxembourg law of 20 December 2002, organised as a société d’investissement à capital variable and registered with the Luxembourg Trade and Companies Register under number B68.806. The SICAV has its registered office at 5, allée Scheffer, L-2520 Luxembourg.
Amundi Funds has been authorised for public sale by the Commission de Surveillance du Secteur Financier in Luxembourg.
Not all sub-funds of the SICAV (the "Sub-Funds") will necessarily be registered or authorized for sale in all jurisdictions or be available to all investors.
Subscriptions in the Sub-Funds will only be accepted on the basis of the SICAV’s latest complete and simplified prospectuses, its latest annual and semi-annual reports and its articles of incorporation that may be obtained, free of charge, at the registered office of the SICAV or respectively at that of the representative agent duly authorized and agreed by the relevant authority of each relevant concerned jurisdiction.
Consideration should be given to whether the risks attached to an investment in the Sub-Funds are suitable for prospective investors who should ensure that they fully understand the contents of this document. A professional advisor should be consulted to determine whether an investment in the Sub-Funds is suitable.
The value of, and any income from, an investment in the Sub-Funds can decrease as well as increase. The Sub-Funds have no guaranteed performance. Further, past performance is not a guarantee or a reliable indicator for current or future performance and returns. The performance data do not take account of the commissions and costs incurred on the issue and redemption of units.
This document does not constitute an offer to buy nor a solicitation to sell in any country where it might be considered as unlawful, nor does it constitute public advertising or investment advice.
The information contained in this document is deemed accurate as at May 2011.
Disclaimer
Amundi, French joint stock company (“Société Anonyme”) with a registered capital of € 578 002 350 and approved by the French Securities Regulator (Autorité des Marchés Financiers-AMF) under number GP 04000036 as a portfolio management company90 boulevard Pasteur -75015 Paris- France – 437 574 452 RCS Paris.www.amundi.comwww.amundi-funds.com
This material is solely for the attention of institutional, professional, qualified or sophisticated investors and distributors. It is not to be distributed to the general public, private customers or retail investors in any jurisdiction whatsoever nor to “US Persons”.Moreover, any such investor should be, in the European Union, a “Professional” investor as defined in Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments (“MIFID”) or as the case may be in each local regulations and, as far as the offering in Switzerland is concerned, a “Qualified Investor” within the meaning of the provisions of the Swiss Collective Investment SchemesOrdinance of 23 June 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA’s Circular 08/8 on Public Offering within the meaning of the legislation on Collective Investment Schemes of 20 November 2008. In no event may this material be distributed in the European Union to non “Professional” investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the definition of “qualified investors” as defined in the applicable legislation and regulation.