Nov 7 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has published Petercam L Bonds Government Sustainable's (PGS), a fund managed by Petercam Institutional Asset Management (Petercam IAM), 'Strong' Fund Quality Rating.
The 'Strong' rating reflects the fund's disciplined responsible investment (RI) approach, guided by an independent Advisory Board, combined with allocation and duration positioning by three experienced portfolio managers (PMs).
KEY RATING DRIVERS
PGS is a UCITS IV-compliant Luxembourg SICAV with EUR157m of assets as of end-September 2013, investing in euro-denominated sovereign bonds issued by OECD countries.
The fund's investment philosophy is that countries engaging in sustainable development will have a positive impact on their creditworthiness over the long-term. An independent Fixed Income Sustainable Advisory Board conducts quantitative analysis across 52 criteria to generate a ranking of OECD countries by sustainability metrics. The top 50% of countries by ranking are eligible for investment. The PMs take investment decisions with input from Petercam's economists. The PMs aim to weight towards countries with the highest RI rankings, although availability of euro-denominated issues is a consideration.
Duration, country allocation and issue selection decisions are taken collectively by three portfolio managers (PMs), which includes Petercam's Fixed Income Chief Investment Officer (CIO) who has been involved in the management of the fund since inception and has 27 years investment experience. Petercam has a separate macroeconomics team of two, whose analysts have investment experience of eight and 14 years respectively. Petercam also employs a dedicated RI co-ordinator, who sits on the Advisory Board in conjunction with two additional Petercam staff and three independent experts.
An independent investment risk team of six oversees and challenges PMs' decisions, making full use of third-party risk analytics such as Barclays POINT. Petercam IAM has outsourced its middle office and IT functions to Lombard Odier since 2012.
Launched in December 2007, the fund has achieved Lipper Leader Consistent Return scores of 2 and 5 over three and five years respectively. Over five years, the fund has returned 30.8% versus 28.2% for the JP Morgan EMU Government index, with an annualised volatility 21 basis points lower.
A large component of short-term fund performance is driven by duration decisions. The sustainability criteria implemented is based on long-term metrics, and short-term performance may lag therefore. The fund is likely to underperform in a rising interest rate environment given its current duration positioning.
Petercam IAM is wholly owned by Petercam SA, which was founded in 1968 and 70% of the equity is owned by 13 partners. It had EUR13.6bn assets under management (AUM) as at June 2013, with EUR1.3bn invested in eurozone government bonds. The company's historical focus has been in European assets and investors.
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 or departure of key investment professionals.
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: Petercam L Bonds Government Sustainable