OREANDA-NEWS. Fitch Ratings has downgraded Parvest Equity High Dividend Europe Fund's rating to 'Good' from 'Strong' and removed it from 'Under Review.' The fund is managed by BNP Paribas Investment Partners (BNPP IP.)

KEY RATING DRIVERS
The downgrade reflects the fund's underperformance of its benchmark and peers since the rating was placed 'Under Review' in August 2014 and over the past two years. (see Fitch Places Parvest Equity High Dividend Europe 'Strong' Fund Quality Rating 'Under Review', dated 20 August 2014 at www.fitchratings.com.) From end-August 2014 to end-January 2015, the fund has returned 4.5% versus the benchmark of 6.3% and Lipper Equity Europe Income category of 8.1%, ranking in the 5th quintile against peer funds. The fund underperformed both peers and benchmark in 2013 and 2014, primarily as a result of specific stock-picking errors.

INVESTMENT PROCESS
The fund uses a fundamental bottom-up approach to select European stocks with high, sustainable and growing dividends. Stock selection draws on a proprietary quantitative screening, selective broker research, and in-house fundamental research performed by the fund's two portfolio managers (PMs). Dividend sustainability and forward-looking factors of future dividends are overall well-captured by these research inputs.

Fitch recognises and views positively the recent improvements to the investment process that have been implemented. It was announced in August 2014 that the fund has refined the initial stock screening element of its investment process - notably refining the financial stock screens and improving the robustness and data coverage of the forward-looking screens using a proprietary model. The improvements were made in conjunction with BNPP IP's central financial engineering team. Portfolio construction has also been adjusted, whereby each PM is now responsible for defined sectors within the portfolio. This gives greater ownership to each PM in terms of stock selection in their respective sectors.

FUND PROFILE
Parvest Equity High Dividend Europe is a sub-fund of the Parvest Luxembourg SICAV, with EUR665m, of assets at end-January 2015. Launched in 2000, the fund has been managed using the current investment process since May 2010. The high income equity team has been managing portfolios using the same investment strategy since 2003.

RESOURCES
The fund is run jointly by two co-PMs who have 15 and 17 years investment experience each. The head of the team in charge of global dividend strategies has over 30 years investment experience and oversees and challenges the PMs' decisions. The PMs are well supported by portfolio management tools and risk reports produced by the front-office using the Style Research application. BNPP IP's independent risk management team provides a second level of oversight over the fund.

In January 2015, closer integration with the BNPP IP European equities teams was introduced, with the two co-PMs assuming analyst responsibilities for the Energy and Utilities sectors formally as part as a wider equity analyst team of 10. There is now more regular and structured interaction with this team, enhancing the breadth of research resources available to the high income equity team.

FUND MANAGER
BNPP IP (rated 'Highest Standards') is the asset management arm of BNP Paribas banking group (A+/Stable/F1). BNPP IP had EUR81bn of equities under management globally (at end June-2014), of which EUR1.5bn are in European high-dividend equity strategies (at end December-2014.)

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. Fitch sees limited key person dependency given the consensual decision making process and closer integration with BNPP IP's European Equity team. A further rating downgrade is unlikely in the current circumstances.

Fitch will monitor the impact that the enhancements to the investment process have on fund performance during 2015 and may upgrade the rating if the fund can demonstrate strong outperformance against peers and its benchmark.

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.