OREANDA-NEWS. Fitch Ratings has upgraded Parvest Multi-Strategy Low Vol's Fund Quality Rating to 'Strong' from 'Good'. The fund is Luxembourg-domiciled and managed by THEAM, a member of BNP Paribas Investment Partners (BNPP IP, rated 'Highest Standards').

KEY RATING DRIVERS
The rating upgrade reflects the fund's more focused approach on downside protection, enhanced usage of option strategies and greater diversification of trades. Its performance in 2015 validated our positive view on these developments, which protected the fund from downside risk and contained market correlation, in line with the fund's low-risk absolute return objective. The fund benefits from a robust investment process that efficiently combines six independent trading strategies within a tight risk-budgeting framework. It also benefits from the depth of BNPP IP's support resources and a robust IT platform

Fund Presentation
Parvest Multi-Strategy Low Vol is an absolute return multi-strategy fund with EUR55m of assets as of end-November 2015. It seeks to outperform the EONIA (Euro Overnight Index Average) over a one-year horizon with low-risk investments, targeting an average annualised volatility of 2% and minimal correlation with markets. It invests mostly in listed derivatives through six independent absolute-return strategies that can be long and short on indices, interest rates or currencies.

Investment Process
The fund's six underlying trading strategies have a low correlation between themselves and with market indices. They are model-driven or discretionary and have different time horizons. A statistically-driven global tactical asset allocation strategy was added in 2014. Greater trade diversification and a more systematic use of options across strategies were notable enhancements in late 2014.

Risk management is particularly strict at the position, strategy and portfolio level. A fairly stable risk budget is allocated to the strategies, while binding stop-losses and an option-based overlay address drawdowns and risk concentration. Each trading strategy has its own performance and risk frequently measured and position sizing is systematically risk-based. Portfolio managers (PMs) are autonomous in their respective strategies and weekly investment committees focus on portfolio construction, risk analysis and overlay.

Resources
The PM team of six comprises experienced and senior PMs with complementary profiles, which are suited to the strategies they manage. Four of the six PMs have been working together since 2008.

Overall, the IT environment is robust, matching the needs of the fund, scalable and well-integrated. The operational framework is appropriate, with standard terms and third parties, and benefits from BNPP IP's risk control framework.

Track Record
The fund has delivered a one-year Sharpe ratio of 0.7 over the last 12 months to end-November 2015 and returned 0.6%, outperforming the EONIA by 0.7%. It demonstrated little correlation to equity and bond markets, in line with its absolute return objective, and after two difficult years has been able to better manoeuvre in a more volatile 2015 market,.

Fund Manager
THEAM, the fund manager, is ultimately owned by BNP Paribas. It has 101 staff and EUR39bn of assets at end-September 2015. It is the expert in indexed, protection and model-driven investments of BNP Paribas Investment Partners, rated 'Highest Standards". The model-driven team manages EUR12bn, of which 25% are in cross assets.

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 of the rating. For example, this may be manifested in significant structural deterioration in the fund's performance, a material deviation from its risk objective or an inability to meet substantial redemptions requests in an appropriate manner. Key man risk is limited given tight risk guidelines and no excessive reliance on one alpha engine.

Fitch sees little potential for an upgrade of Parvest Multi-Strategy Low Vol, given the specific nature of the fund (low volatility and resulting limited performance) as well as its already high ratings.