OREANDA-NEWS. Fitch Ratings has upgraded La Francaise Allocation's Fund Quality Rating to 'Strong' from 'Good' and affirmed La Francaise Patrimoine Flexible's Fund Quality Rating at 'Strong'.

KEY RATING DRIVERS
The upgrade of La Francaise Allocation's rating reflects a stabilised and more robust team-oriented investment process, which has demonstrated its ability to deliver since it was reshuffled in early-2014. It efficiently combines in-house macro, fundamental and technical views within a dynamic risk allocation framework driving portfolio construction.

The affirmation of La Francaise Patrimoine Flexible reflects the robust and disciplined investment process formalised around documented committees, sound supporting analytics tools at the front-office and for risk management oversight.

Fund Profile
La Francaise Allocation is an absolute return fund with EUR330mn of assets at end-November 2015. Its global macro approach seeks to de-correlate from traditional asset classes and deliver an absolute return above its reference index (Euribor 1 Month + 350bp). It implements directional (long/short) and relative value trades on mainstream equity, fixed income and currency markets, through liquid instruments, primarily futures. The process is based on a disciplined combination of fundamental macro views and technical market factors.

La Francaise Patrimoine Flexible is a global, multi-asset fund with EUR445m of assets at end-November 2015. It is the representative fund of La Francaise AM's expertise in flexible long-only multi-asset portfolio management. The fund seeks to capture most of the market performance while preserving capital in adverse environment. It may adjust its equity exposure from 0% to 65% and invests across a broad range of asset classes through long-only funds, trackers and futures.

Resources
The investment team organisation is relatively flat, supporting portfolio managers' (PM) accountability and information sharing across sub-teams. The 10-member cross-asset team is headed by Joel Konop and includes the total return sub-team managing La Francaise Allocation and the flexible asset allocation sub-team managing La Francaise Patrimoine Flexible.

The two sub-teams are jointly headed by Francois Rimeu since early-2014. He is also lead PM of La Francaise Allocation. The two funds are managed by experienced PMs with long tenure at La Francaise AM. Fitch believes the funds' team-based approach is well-suited to the funds' positioning given the variety and complexity of strategies covered, notably for La Francaise Allocation. It also allows PMs to express their individual convictions within a disciplined risk framework.

PMs efficiently draw on macro and fundamental views from other members of the investment team, around 40 PMs/analysts covering equities, bonds, credits and emerging markets through sequenced committees. Dedicated and well-staffed financial engineering, investment risk, control and operational teams provide adequate oversight and support to the fund.

Track Record
La Francaise Allocation has returned 8% and 19% over one and three years to end-October 2015, outperforming its peer group and achieving a Lipper Leader score of 5 over the two periods. The fund's superior return over the past two years has more than offset its 2013 underperformance.

La Francaise Patrimoine Flexible has outperformed its Lipper category over 3, 5 and 10 years to end-October 2015, achieving Lipper Leader scores of 4, 4 and 5 over these periods. It is however underperforming its composite benchmark, over these periods. Fitch notes that this benchmark (50% DJ Stoxx 600 + 50% EuroMTS Global) is not fully consistent with the fund's broader investment universe.

Fund Manager
La Francaise AM is part of La Francaise Global AM, the securities investment arm of La Francaise group, an asset management company majority-owned by Credit Mutuel Nord Europe. La Francaise Global AM managed EUR34bn of assets at end-June 2015 of which EUR6bn was in cross-asset products.

RATING SENSITIVITIES
The ratings 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 or excessive risk taking. Key man risk is limited given the team-based investment approach.

Conversely, an upgrade could result from a proven ability to outperform peers consistently on a risk-adjusted basis over five years.

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.