OREANDA-NEWS. Fitch Ratings has affirmed DNCA Invest Evolutif's 'Strong' Fund Quality Rating. The fund is managed by DNCA Finance

KEY RATING DRIVERS
Fund Presentation
DNCA Invest Evolutif is a flexible balanced fund invested in equities and bonds (including convertible) of large European companies with an active management of allocation. It was launched in July 2007 and had EUR481m of assets at end-February 2015.

Investment Process
The fund's key investment strength and performance driver is the team's deep knowledge of the companies it invests in, which explains the bias towards French entities, and the opportunistic approach to asset selection and allocation, based on assets' risk/return prospects.

The investment process focuses on a core value/dividend-oriented portfolio with asset allocation managed actively within the authorised limits (30% to 100% of equity exposure). The process itself predates the fund, having been established in 2000.

Formalisation of the investment process is limited, but this is mitigated by strong communication between investment professionals, the small size of the team and the strong accountability of the portfolio managers (PMs).

Resources
The fund is led by Mr Delaye, who has 28 years of experience in fund management and is a co-founder and shareholder of DNCA Finance. Augustin Picquendar, who has seven years of investment experience, has been the co-manager since 2011. They are supported by a PM assistant. Together they also manage the French clone of the fund (DNCA Evolutif) as well as four funds following the same investment approach with a lower equity exposure (0 to 50%).

DNCA Finance's IT system is currently rather basic, but is evolving towards an integrated front-to-back system, which will be implemented and operational in 2015. With this new tool, the company expects to significantly improve the operational scalability and workflows for order management, controls and reporting.

Track Record
DNCA Invest Evolutif (B share-class) had Lipper Leader scores for consistent return of '5' over three and five years as of February 2015. It returned 3.6% in 2014, slightly outperforming its Lipper category. Over five years to end-February 2015, the cumulative outperformance relative to peers reached 18.6%. This robust and consistent track record supports the "Strong" Fund Quality Rating.

Fund Manager
DNCA Finance (through DNCA Finance & Cie) was founded in 2000 and was majority-owned by TA Associate, a private equity fund, since 2011. It announced in February 2015 the acquisition of 71% of its capital by Natixis, which will come into effect mid-2015. DNCA management will remain a shareholder alongside Natixis with a progressive exit. At end-2014, DNCA Finance had more than EUR14bn of assets under management, mainly in European equity and balanced funds. This almost tripled from EUR5.2bn at end-2012, due to strong net new money gained over the past two years, evenly split between French and foreign investors.

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. In the case of DNCA Invest Evolutif, the lead PM occupies a key role and his departure would likely result in a rating review. Conversely, the materialisation of the IT development and resulting improvements on operational workflows could lead an upgrade, provided the fund's performance remains strong. Fitch will also closely monitor the effectiveness of the current shareholder change and assess its impact on the fund.

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.