AAA-rated club

Citywire rates managers running Alternative Ucits funds based on three main criteria which the managers are required to pass before being rated, and must have a minimum of 36 months performance in a sector:

  • Ability to beat cash +2% over 3 years (cash is represented by Euribor 3months)
  • Controlled losses (maximum drawdown can’t be 50% higher than peer group average)
  • Generate strong risk adjusted performance over 3 years

In this gallery, Citywire Investment Research turns its attention to the managers active in the Alternative Ucits – Bond Strategies sector and focuses on those currently holding the coveted AAA Citywire rating based on this absolute returns methodology.

Note: the manager’s longest running euro share class of the fund is used for analysis.

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Fraser Lundie, Hermes IM

Hermes IM’s Fraser Lundie hit his three-year anniversary managing funds in the Alternative Ucits – Bond Strategies sector in May 2017. He has held a Citywire AAA rating ever since becoming eligible and is also ranked first for this three-year total returns against his peers in the sector since May.

Lundie manages the Hermes Multi Strategy Credit F EUR Acc fund and the investment objective is to generate a high level of income by primarily investing in a diversified portfolio of credit securities. This can include IG bonds, high yield bonds, credit default swaps and money market securities, while aiming for lower volatility relative to the global high yield market.

At the end of October, Lundie had 18.35% invested in Western Europe and 11.62% in the UK. His top two holdings were Italian telecommunications company Telecom Italia and multinational steel manufacturing company ArcelorMittal, which were 4.78% and 3.76% positions respectively. The portfolio’s duration stood at 2.35 years at the end of October.

Performance over the discrete year periods 2015 and 2016 were very strong for Lundie. He posted returns of 11.8% in 2015 and 12.6% in 2016. However, 2017 has been a tough one so far with returns of -6.6% to the end of Q3.

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Teemu Liikanen, Danske Invest

Dankse Invest’s Teemu Liikanen has risen one notch in the Citywire ratings in November and has received his first ever AAA rating. He manages the Danske Invest Neutral Kasvu fund in the Alternative Ucits – Bond Strategies sector and has overseen it since 2007.

He invests in the international fixed income markets and has the ability to invest in money markets, corporate banks, and government and convertible bonds and may utilise the currency markets to achieve returns.

The fund has an impressive track record and delivered positive returns in each of the discrete years it has been active, except in 2011 where he made a small loss of 0.2% at the time of the eurozone sovereign debt crisis. So far in 2017, to the end of Q3, Liikanaen has returned 3% on the fund.  Duration of the fund at the end of October was 1.65 years and his top two largest holdings were 1.5 Neste Oyj 07/06-2017/2024 (2.8%) and Danske Bank Frn Perp/Call (2.6%).

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Ignacio Victoriano, Renta 4

Ignacio Victoriano manages the Renta 4 Valor Relativo, FI fund in the Alternative Ucits – Bond Strategies sector. He has managed the fund since April 2010 and has held a AAA rating for a total of 16 months out of the 20 months he has been eligible for the Citywire ratings analysis.

He has delivered positive returns in each discrete year the fund has been active, except for 2011 where the fund made losses of 9%. Victoriano was able to recoup those losses in 2012, returning 10.3%, while in 2017 to the end of Q3, Victoriano has returned 4% on the fund.

His recent investment decisions have been affected by the shortage of carry trades due to the low rates of interest and the lack of volatility in the markets. For these reasons Victoriano describes the asset allocation in the fund of being more complex in recent months. The strategies he carried out in October included T-Bond shorts on German and Spanish bonds.

The main contributors to performance in October were UNNIM, Mapfre, Telefónica, Liberbank and Santander Bank, among others. At a sector level, his top exposures are banks (37.8%) and telecommunications (11.15%), with the main country exposures being Spain (53.2%) and Italy (8.04%).

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