Amundi broadens its minimum variance expertise with the launch of Amundi Funds Equity Global Minimum Variance

As part of its “NextGen” Strategies range [1], Amundi has added a new fund to its Minimum Variance strategy with the launch of Amundi Funds Equity Global Minimum Variance, a sub-fund of the Luxembourg SICAV Amundi Funds. UCITS IV compliant, this sub-fund seeks to outperform the MSCI World index [2], over a 5-year investment horizon, whilst aiming to maintain a lower level of volatility than that of the index [3]. Through its original approach, this sub-fund, investing at least two thirds of its assets in global equities represented within the MSCI World index, aims to offer a solution adapted to the needs of clients seeking to limit the overall absolute, rather than relative risk in their equity portfolio [4].

Against a backdrop of an uncertain outlook and challenging market environment in international markets , investors’ needs are changing. While they continue to seek long term performance, risk management and portfolio construction have now become the key concerns. Amundi’s NextGen strategies are designed to smoothen the ride to provide an improved return potential with lower risk [5].

Through its advanced monitoring process, the minimum variance approach offers a solution for risk-sensitive investors faced with volatile stock market conditions.

Melchior Dechelette, fund manager of Amundi Funds Equity Global Minimum Variance comments: “Amundi’s Minimum Variance management technique now has a successful 3-year track record within a European equity universe. Using the same investment approach, this new fund offers investors a highly diversified exposure to global equity markets with the aim of capturing the potential upside while controlling risk. ”

In order to fulfil the dual objective of increasing performance and reducing volatility, the management team implements a Minimum Variance process focused on quality stocks, which is complemented by close monitoring of risk exposure:
 Quality stock selection: The investment team has developed a fundamental quality scoring system that is based on public financial information. This screening tool is used to shrink the initial investment universe and retain only those companies with the most solid fundamental profiles.
 Minimum Variance process: The investment team then implements the Minimum Variance approach on the improved eligible universe. Using quantitative optimization tools, each stock is weighted according to volatility and correlation criteria in order to minimise the variance (volatility) of the portfolio.
 Active risk monitoring: Going beyond the Minimum Variance process, the team singles out possible risk concentration and reduces exposure to factors (sectors, countries, styles) that are deemed too risky with the aim of avoiding excessive exposure to crowded trades whose unwinding may be detrimental to portfolio performance.

Over the last five years, Amundi has developed its “NextGen” range, comprising five equity strategies enabling investors to take a different approach to equity investment, with risk management taking centre stage. Drawing together several areas of expertise, Amundi proposes an alternative to traditional stock-picking involving advanced risk monitoring and in-depth equity research and analysis. Assets under management for “Next Gen” Strategies reached EUR1.2 billion at end August 2012.