OREANDA-NEWS. Fitch Ratings has affirmed the 'Strong' Fund Quality Ratings of Tikehau Credit Plus (TC+) and Tikehau Taux Variable (TTV). The funds are managed by Tikehau Investment Management (Tikehau IM).

KEY RATING DRIVERS
Fund Presentation
TC+ and TTV are French Fonds Commun de Placement (FCP) with EUR358m and EUR466m of assets at end-January 2015, respectively. TC+ is a flexible credit fund primarily invested in eurozone high-yield (HY) bonds (typically 70%) and with a performance target of close to the average HY market yield over the medium term with lower volatility. TTV is a short-duration credit fund primarily invested in eurozone investment-grade bonds and notes. It seeks to outperform the three-month Euribor + 150bp, with a volatility typically ranging between 1% and 3%.

Investment Process
The investment approach of both funds combines bottom-up credit selection and dynamic tactical allocation. Active management of interest rate duration and market exposure is achieved through flexible allocations to credit sub-asset classes and cash, as well as derivative strategies.

Proprietary credit research is comprehensive, covering fundamental, relative value and liquidity factors. Coverage focuses on under-researched, more complex credits to optimise use of internal analytical resources.

Portfolio construction is not benchmark-constrained but must adhere to targets of risk budgets, market positioning and asset allocation, defined during weekly top-down meetings. Portfolio construction and monitoring is supported by advanced third-party and proprietary risk analytics.

Resources
The seasoned portfolio manager (PM), part of a team of four PMs, is supported by the small but focused credit team, comprising three credit analysts. In addition, the head of credit has a key input in defining the funds' top down macro positioning. Research resources are allocated opportunistically across sectors due to the small size of the team.

The fund also benefits from Tikehau IM's and Tikehau Group's resources in operations and controls. Sophis Value and Bloomberg offer full coverage of portfolio monitoring, order management, analytics and compliance checks.

Track Record
TC+ has delivered an annualised performance of 7.7% over five years as at January 2015, with a lower volatility than the BofA Merrill Lynch Euro High Yield Index (by 1.5% annualised over five years). Despite an overall defensive profile, the fund has outperformed the Lipper Euro high yield category.

TTV has delivered an annualised performance of 4% over three years at end-January 2015, with a 1.0% annualised volatility. In 2014, the fund has saturated its HY limit of 35% to reach for short-term yield, in a context of declining volatility.

Asset Manager
Established in 2006, Tikehau IM as a France-domiciled asset manager specialised in eurozone credit and debt investments, recently diversifying to equities and multi-assets. It is part of the Tikehau group (EUR5bn AUM at end-2014), created in 2004 and owned by six partners and two financial institutions. At end-2014 Tikehau IM employed 45 staff and was managing EUR3.6bn of assets (a 56% growth yoy).

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 fund's performance, excessive risk deviation from objectives, material reduction in research staff or departure the head of credit. Fitch sees little potential for an upgrade, given the specific nature of the fund and its benchmark/the fund's already high ratings

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.