Fitch Affirms Sycomore AM's Asset Manager Rating at 'High Standards'
KEY RATING DRIVERS
The rating reflects the organisation's institutional set-up, its longstanding and disciplined stock selection process, managed by an experienced team of 14 portfolio managers/analysts. The rating also factors in a sound risk management framework and efficient operational platform, adapted to current volumes and assets, although growing bond volumes may require additional resources. It also reflects the company's success in diversifying its product mix towards credit, asset allocation and long-short strategies, which helps reduce sensitivity to eurozone equities.
The main challenges facing Sycomore AM remain its pursuit of development abroad, which today represents roughly 12% of total assets under management (AUM), and the development of its diversifying strategies with adequate resources in operations, controls and risk management.
Sycomore AM's 'High Standards' rating is based on the following category scores:
Company: High
Controls: High
Investments: Highest
Operations: High
Technology: High
Asset manager operations in the 'High Standards' category have an investment platform and operational framework that Fitch considers strong relative to the standards applied by institutional investors in international markets.
Company
Regulated by French AMF, Sycomore is an entrepreneurial asset management company, with a 14-year track record in managing eurozone equities. Its AUM significantly grew in 2013 and 2014 due to strong inflows into flexible, long/short and socially responsible investing (SRI) products, coupled with positive market momentum. This allowed the company to reach its highest AUM level since 2007, at EUR2.9bn, and to further diversify its product base, therefore reducing its business sensitivity to European equities. The teams have been stable with six new hires so far in 2015. A large part of the staff is shareholders of the company.
Controls
The risk management and control framework covers the main risk areas well, with appropriate automated controls on transactions. Investment risk management, performed by a four-member team, provides sound support and data accessibility to the front-office. Risk analytic tools have mostly been developed in-house with the exception of Northfield.
Investments
Sycomore AM's investment processes are disciplined and transparent, supported by a comprehensive bottom-up research and valuation method using a regularly updated proprietary database. The 14 analysts/portfolio managers (PMs) interact efficiently, with a streamlined research organisation and focused research committees. Over the past year, the company's eurozone strategy has been revamped towards more concentrated portfolios, and three new products, using SRI approaches, have been launched.
Operations
Investment administration, performed by a stable and experienced team, is efficient. It offers an appropriate level of security in line with the scope of instruments covered and volumes, which include an increasing portion of bond instruments. Investor reporting is produced in-hose on a timely basis and provides comprehensive and relevant portfolio information.
Technology
Sycomore AM's technological platform is built around proprietary applications - with the exception of Northfield for risk analytics - offering a high level of integration and adequately supporting the company's needs. Its business continuity plan is effective and regularly tested.
Established in 2001, Sycomore AM is an independent asset management company that is 87%-owned by its founding partners and employees. Its historic area of expertise is the fundamental selection of eurozone equities, complemented by other investment strategies. At 30 May 2015, Sycomore AM employed 41 staff, including 14 investment professionals, and its AUM totalled about EUR2.9bn. The client base, primarily French, comprises private clients, institutional clients and multi-managers.
RATING SENSITIVITIES
The rating may be sensitive to material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies. A material deviation from Fitch guidelines for any key rating driver could cause Fitch to downgrade the rating.
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