OREANDA-NEWS. Fitch Ratings has affirmed La Francaise Global AM's Asset Manager Rating at 'High Standards'. The Outlook is Stable.

KEY RATING DRIVERS
The affirmation reflects La Francaise Global AM's specialised investment capabilities, reasonably diversified asset mix, strong governance standards supporting alignment of interests with clients and long-standing committed shareholder. It takes into account experienced and stabilised staffing resources, supported by selected strategic partnerships. A robust control framework and well-suited in-house front- to back-office application further underpin the rating.

The main challenges facing La Francaise Global AM are to grow recently rejuvenated investment capabilities, namely equity, emerging markets fixed-income and multi-asset to make these scalable while maintaining effective risk management oversight. Optimising operational processes and workflows under cost conscious management and further formalising the oversight of third-parties' delivered services will also be key factors in Fitch's view.

La Francaise AM's 'High Standards' rating is based on the following (unchanged) category scores:
Company: Highest
Controls: High
Investments: High
Operations: High
Technology: Highest

Asset manager operations in the 'High Standards' category demonstrate an investment platform and operational framework that Fitch considers strong relative to the standard applied by international institutional investors.

Company
The company has limited gearing and remains profitable although operating margin has declined. Following business reorganisation in 2013 and early-2014, La Francaise Global AM consolidated around core investment activities and its partnerships with Inflection Point Capital Management (IPCM), Tages Capital, JK Capital Management and Alger. This provides for a sufficiently broad product range, spanning fixed-income, sustainable equity, multi-asset, Asian and US investments, and a diversified, still mainly domestic, client base.

The company also benefits from a long-standing relationship with its parent, Credit Mutuel Nord Europe (CMNE), an investment-grade regional bank. Business organisation and clearly defined responsibilities between La Francaise Global AM and its parent, La Francaise group, where central commercial and support resources seat, support adequate segregation of responsibilities.

Controls
La Francaise Global AM has a well-structured and -resourced risk and control framework with adequate independence from the investment and operational teams. Compliance and controls procedures are supported by built-in controls in the company's backbone application and by direct and well-interfaced access to that tool. They have been strengthened for tighter counterparty risk management. Third-parties are appropriately overseen, notably through recently reviewed custodian agreements, which have been reviewed in the context of the AIFM directive and ahead of UCITS V. Investment risk management resources allow good market and liquidity risk oversight.

Investments
Investment teams and set-up have been broadly stable since the early-2014 reorganisation and proved efficient. Combined with high-profile hires in the emerging market and equity teams over the past 18 months, these contribute to stronger investment processes with robustly-defined performance drivers and more clearly identified investment edge.

Fundamental research-driven investment processes are implemented in a disciplined manner that emphasises top-down inputs and committee-driven decision-making. Investment committees support effective information-sharing across investment teams. Financial engineering provides an increasing efficient support to investment process, in Fitch's view. This may most importantly materialise through the portfolio construction modelling tools that are in progress. Fitch notes the reshaping of the equity process is now effective, with a clearly formalised framework to integrate analytical and scoring inputs from IPCM.

Operations
Investment operations are scalable, organised around a highly-automated operational workflow. Order matching with brokers and counterparties is automatically handled via Omgeo for equity and now also fixed-income securities. The workflow for complex OTC instruments lacks fully integrated system capabilities. Comprehensive client reporting is of high quality and among the best market standards. Fund administration and custody are primarily delegated to BNP Paribas Securities Services.

Technology
La Francaise Global AM's proprietary IT platform, Light Trade, is fully integrated and efficiently supports the company's activities, although its primarily French interface limits the use of Light Trade as a platform for non-French speaking investment centres. It is regularly enhanced to accompany the company's development. Vendor solutions interfaced with Light Trade complement the technological set-up, notably in the areas of risk, controls and reconciliations. Business continuity and recovery planning is robust and regularly tested.

Company Profile
La Francaise Global AM is the securities management arm of La Francaise group, a French asset management company, majority owned by Credit Mutuel Nord Europe. It groups La Francaise AM, La Francaise Inflection Point (LFIP), JK Capital Management and Alger and managed EUR34bn of assets as of end-May 2015. Fitch's rating scope includes fixed income, cross-asset and equity portfolio management activities undertaken by La Francaise AM and LFIP.

RATING SENSITIVITIES
The rating may be downgraded as a result of material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies.