OREANDA-NEWS. Fitch Ratings has affirmed SSGA Global Managed Volatility Equity Fund's 'Strong' Fund Quality Rating. The fund is managed by State Street Global Advisors (SSGA).

KEY RATING DRIVERS
Fund Presentation
SSGA Global Managed Volatility Equity Fund is a Luxembourg SICAV with USD263m of assets at end-June 2015, up 60% from a year ago. It is managed via a model-driven approach, with the aim of building a low volatility portfolio of global equities. The fund does not have a target volatility budget but aims to be less exposed than the MSCI World Index to market segments exhibiting high volatility.

Investment Process
A key input in the portfolio construction is the systematic analysis of stocks' volatility based on a fundamental multi-factor model, unchanged since the fund's inception. This allows a systematic assessment of factors driving a stock's volatility and correlations. SSGA follows a robust process for quantitative model development and review with appropriate model governance.

Portfolio construction is highly disciplined and under the responsibility of the lead portfolio manager (PM), without much judgmental input. It draws on the multi-factor risk model and a portfolio optimisation process, which minimises the fund's expected absolute volatility under specific diversification and liquidity constraints. The fund is typically rebalanced every quarter or more frequently in cases of large investor flows.

Resources
The experienced lead PM is supported by a well-resourced managed-volatility equity team of 13, part of the wider global equity beta solutions group. SSGA's investment resources are solid, including a global trading desk and an investment risk team of 22.

The fund benefits from SSGA's operational and risk control framework. The IT environment is built around third-party systems, supporting well-controlled, efficient workflows.

Track Record
The fund has achieved a good risk-adjusted return since inception relative to the MSCI World index, outperforming by 11% (cumulative, net of fees) with a lower volatility. After a strong 2014, the fund is lagging by 2.4% in 2015 to end-June. On a risk-adjusted basis, the fund is in the best and second-best quintile among peers over five and three years, respectively. The fund tends to underperform in rapidly rising markets but typically experiences smaller drawdowns than the index during market downturns.

Asset Manager
SSGA is the investment management arm of State Street Corporation (AA-/Stable/F1+). It is a global asset manager with USD2.4trn in assets under management at end-March 2015, including USD3.4bn in managed volatility strategies.

RATING SENSITIVITIES
The rating may be sensitive to material changes in the investment or operational processes, or in resources dedicated to the fund. A material adverse deviation from Fitch's guidelines for any key rating drivers could result in a downgrade. For example, this may be manifested in significant structural deterioration in the funds' performance or an excessive deviation from risk objectives. Key person risk is limited for this fund, but model risk exists. Fitch sees limited upside potential to this fund's rating given its somewhat systematic investment approach, which results in the fund's rating being capped at 'Strong' as per Fitch's Fund quality Rating criteria.

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.