OREANDA-NEWS. Fitch Ratings has affirmed the Fund Quality Ratings of three fixed income funds managed by BNP Paribas Investment Partners (BNPP IP; 'Highest Standards') as follows:

Parvest Bond Euro Corporate affirmed at 'Strong'
Parvest Bond Euro affirmed at 'Good'
Parvest Bond Euro Medium Term affirmed at 'Good'

The rating affirmations are driven by the funds' robust and well-balanced investment processes that combine the independent inputs of credit and macro-economic research in a disciplined and formalised manner and which embed risk management. Parvest Bond Euro Corporate's 'Strong' rating further reflects a demonstrated investment edge in identifying and diversifying sources of returns within a tight risk-budgeting framework. All three funds also benefit from the depth of BNPP IP's fixed income and support resources and a robust IT platform.

KEY RATING DRIVERS
Funds' Presentation
Parvest Bond Euro Corporate, Parvest Bond Euro and Parvest Bond Euro Medium Term are sub-funds of the Parvest Luxembourg SICAV, with EUR2.6bn, EUR1.6bn and EUR930m assets as of end-November 2015, respectively. They follow an active, primarily fundamental investment approach, with Parvest Bond Euro Corporate focusing on euro investment grade (IG) corporates and the two other funds allocating across euro sovereign and IG corporate bonds.

Investment Process
The investment process of Parvest Bond Euro Corporate is disciplined and team-based. A model portfolio drives portfolio construction, emphasising the diversification of strategies and sources of performance, within a tight risk-budgeting framework. Macro-economic views, formalised at monthly credit strategy committees, inform the risk-budgeting process, while documented credit research and relative value analysis support security selection.

Parvest Bond Euro and Bond Euro Medium Term combine investment strategies across different time periods and alpha sources (duration, yield curve, sector and credit selection). Portfolio duration is flexibly managed. The in-house macro view translates into the definition of three-month interest-rate forecasts, which form the basis for risk budget allocation. Country and yield curve analysis has been refined with the implementation of a carry/roll-down analysis tool. Portfolio construction reflects risk budget allocations and team views, formalised in model portfolios. The funds' strong portfolio and risk monitoring are differentiating factors in Fitch's view.

Resources
The euro corporate IG credit team consists of five experienced portfolio managers (PMs). The fund is run by Victoria Whitehead (15 years of industry experience), working closely with Christophe Auvity, global credit Chief Investment Officer (CIO).

The euro sovereign and aggregate team consists of 17 experienced investment professionals. The team is run by Patrick Barbe with 27 years of experience and company tenure. The team is organised according to a matrix approach where portfolio managers also have responsibilities for market research and idea generation, under the responsibility of four market heads.

The funds benefit from the separate in-house fundamental credit research of 13 analysts and from dedicated fixed income risk managers in addition to strong shared operational and control functions. The fixed income platform benefits from a robust suite of third-party and proprietary applications.

Track Record
Parvest Bond Euro Corporate closely follows the benchmark (Barclays Euro Aggregate Corporate Index) in line with its objective (tracking error target of 1%-1.5% and outperformance objective of 75bp gross of fees). For this reason Fitch expects it to be a median performer in most market regimes and over the long term. Nevertheless, over three years to end-November 2015, the fund has outperformed its benchmark net of fees and category by 0.71% and 2.49%, respectively. Credit selection has been the main driver of performance over the past three years.

Parvest Bond Euro has a long-term, sound, consistent risk-adjusted performance compared with peers but has underperformed relative to the index (Barclays Euro Aggregate Bond Index). Over the 12 months to end-November 2015 the fund returned 2.1%, outperforming its Lipper category by 0.9% but lagging the index by 0.7%. It is managed with a tight soft-tracking error target of 1.5%.
Parvest Bond Euro Medium Term has performed in line with its peer group over the past one year and modestly underperformed its benchmark (Barclays Euro Aggregate 3-5 Years Bond Index). It is lagging behind peers and benchmark over a three- and five-year period but is nonetheless achieving Lipper Leader scores of 3 over three, five and 10 years.

Fund Manager
BNPP IP is the asset management arm of BNP Paribas banking group (A+/Stable/F1). As at end-September 2015, the company had EUR509bn of assets under management (40% in fixed income). BNPP IP is rated 'Highest Standards', reflecting an investment platform and operational framework that Fitch considers to be superior than the standards applied by institutional investors in international markets.

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 of the rating. For example, this may be manifested in significant structural deterioration in the fund's performance or a material deviation from their risk objectives or an inability to meet substantial redemptions requests in an appropriate manner. Key man risk is limited given the depth of the investment and research team and the process-driven investment approach.

Fitch sees little potential for an upgrade of Parvest Euro Corporate, given the specific nature of the fund (tracking error target being a constraint on the ability to outperform) as well as its already high ratings. An upgrade of Parvest Bond Euro and Parvest Bond Euro Medium Term could result from a proven ability to outperform their respective indices and peers consistently on a risk-adjusted basis over five years.