OREANDA-NEWS. Fitch Ratings has affirmed Parvest Equity Best Selection Europe's Fund's Fund Quality Rating at 'Strong' and removed it from 'Under Review'. Fitch has also affirmed Parvest Equity Best Selection Euro Fund's Fund Quality Rating at 'Strong'. Both funds are managed by BNP Paribas Investment Partners (BNPP IP; Highest Standards).

KEY RATING DRIVERS
The funds' 'Strong' ratings reflect their documented investment approach, which is supported by in-depth research and portfolio management resources. In Fitch's view, the depth of research, the industry focus, the peer decision making process and risk discipline differentiate the funds from their peers.

Fitch placed Parvest Equity Best Selection Europe Fund 'Under Review' in February 2015, as a result of its underperformance relative to peers and benchmark since mid-2013. Since then, performance has rebounded, as the fund has performed in line with peers and benchmark to the end of July. Fitch views positively that the asset manager reviewed the process and individual stock issues thoroughly but stayed loyal to its unique investment approach. Consequently, Fitch believes that the period of underperformance was temporary and stock-specific, rather than structural and process-related. For this reason, the agency removed the fund from 'Under Review' and affirmed the rating.

FUND PRESENTATION
Launched in 2004, Parvest Equity Best Selection Europe and Euro are two Luxemburg-domiciled, UCITS compliant European equity funds, with EUR1.9bn and EUR1.2bn of assets under management, respectively, as at end-June 2015.

INVESTMENT PROCESS
The funds' active, stable, long-term investment approach with a three- to five-year holding period is based on bottom-up fundamental stock-picking. The funds are fully invested, and have a quality mid- to large-cap growth bias but no sector bias.

BNPP IP's proprietary research differentiates itself from peers by its industry focus, depth of analysis and degree of formalisation. Analysts' recommendations are challenged through a peer review process.

Investment decisions are subsequently taken in a collegiate manner by the whole European equity team. Risk budgeting drives portfolio construction, with stock-specific factors and active shares maintained at above 50% and 70%, respectively. Each source of common risk factors is capped at 10%.

RESOURCES
The stable European equity team consists of 10 portfolio managers (PM)/analysts, who have 21 years' experience on average. In addition to BNPP IP's deep shared risk management resources (front office and independent risk team), the team benefits from a dedicated equity risk manager, making full use of equity third-party risk analytics.

TRACK RECORD
Since inception, Parvest Equity Best Selection Europe and Euro rank second quintile in their respective categories. Excess return results mainly from stock selection, in line with investment style.

After almost a decade of strong performance, the funds were penalised by their quality bias between mid-2013 and mid-2014. Additionally, in 2H14, Parvest Equity Best Selection Europe suffered from the selection of underperforming stocks in the non-euro area, which have rebounded since February 2015.

FUND MANAGER
BNPP IP had EUR13.1bn of European equities under management (including EUR6.7bn in the "Best Selection" range, at end-May 2015).

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. Fitch sees limited key person dependency in the team, so the departure of a PM is unlikely to affect the rating. Conversely, an upgrade could result from the fund demonstrating that it is able to outperform its peers in a sustained period of detrimental market regime, characterised by the outperformance of low quality, value stocks.

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.

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