OREANDA-NEWS. Fitch Ratings has upgraded Sycomore Selection Responsable's (SSR) Fund Quality Rating to 'Strong' from 'Good'. The fund is France-domiciled and managed by Sycomore Asset Management (Sycomore AM, rated 'High Standards').

KEY RATING DRIVERS

The upgrade reflects material enhancements made to the extra-financial research framework as part of a thorough review of environment, social and governance (ESG) factors driving Sycomore AM proprietary ESG analysis. This robust and disciplined framework, combined with strengthened investment and research resources, efficiently supports the fund's ability to pursue its core socially responsible investment (SRI) process and maintain its long-term performance track record in line with objectives.

Fund Presentation

Launched in January 2011, SSR is a long-only eurozone equity fund following an SRI approach. It had EUR498m of assets at end-June 2016.

Investment Process

The fund's investment process combines Sycomore AM's highly-disciplined, fundamental stock-picking approach, with proprietary environment, social and governance (ESG) filters. The combination allows the fund to exclude stocks vulnerable to ESG risks and to select those well positioned to seize opportunities related to sustainable development. A distinctive feature is the depth of the fundamental research that now more closely integrates ESG analysis, primarily based on management meetings and internal analysis. This process contributes to the stock selection decisions that drive the fund's market exposure and sector allocation. The fund has no specific sector or benchmark constraints.

Resources

ESG research is led by Bertille Knuckey who benefits from six years of experience in the field. She joined Sycomore AM in May 2015 and co-manages the fund with Cyril Charlot, a founding partner of the company and co-PM on the fund since its inception, and two more PMs. The ESG research team of five has been materially strengthened with the hire of a seasoned expert on environment topics in 2015 and the recent addition of a junior analyst. Two more recruitments are in the pipeline.

Track Record

The fund has outperformed its benchmark and peers over three and five years, standing in the first quintile of the Lipper Global Equity Eurozone category, as it demonstrated a good resistance to market drawdown in 2H15 and 1Q16. SRI views on companies tend to lead to significant sector biases, which have remained relatively stable since the fund's inception. They may at times contribute to large performance deviations relative to the benchmark and peers. Stock-picking continues to be a strong positive contributor to the fund's performance.

Fund Manager

Founded in 2001, Sycomore AM is an independent asset management company, 87% owned by its four founding partners and employees. At end-June 2016, Sycomore AM had EUR4bn of assets under management and employed 46 staff, including 15 portfolio managers/analysts.

RATING SENSITIVITIES

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. For example, this may be manifested in significant structural deterioration in the fund's performance or excessive risk taking. Key man risk is limited given the team-based research and investment approach. Conversely, an upgrade could result from a longer robust track record relative to peers, measured on a risk-adjusted basis.