OREANDA-NEWS. Fitch Ratings has affirmed LO Funds - Europe High Conviction's (EHC) 'Strong' Fund Quality Rating. The fund is managed by Lombard Odier Investment Managers (LOIM).

KEY RATING DRIVERS
The investment process and philosophy of the fund remained unchanged following the departure of the lead portfolio manager (PM). The two co-PMs are able to achieve the fund's objectives and it outperforms peers on a risk-adjusted basis. The fund's performance is 19.7% and volatility 19.9% from end December 2014 to end November 2015 (total return, source Lipper).

The 'Strong' rating reflects the fund's disciplined approach to investing within a well-defined, narrow investment universe. All investments are segmented into three categories, allowing a focus on only the best ideas within the specified universe. The rating is supported by the team's risk discipline, which is strongly embedded in the fund's investment philosophy.

FUND PROFILE
EHC is a sub-fund of LO Funds, Lombard Odier's Luxembourg SICAV, which is UCITS compliant. Launched in 1997, the current investment process has been in place since November 2010. The fund invests in Western European equities, with clear sector omissions. Structurally, the fund does not invest in financials, oils, metals & mining stocks. As of end-November 2015, EHC had EUR1,275m of assets.

INVESTMENT PROCESS
The fund adopts a high conviction, bottom-up approach. Portfolio construction is aided by segmenting investments into the three categories: High Quality Companies, High Growth Companies and Corporate Event Candidates. The fund is designed to outperform the MSCI Europe ND index over the long term, in all market environments.

The team conducts its own proprietary 12-point risk monitoring process on a weekly basis. These include exposure limits, fundamental risks and trading risks. This ensures that the fund is suitably diversified from a risk perspective, despite investing in a concentrated portfolio of typically 30-40 securities.

RESOURCES
Two co-PMs, Cyril Marquaire and Peter Dionisio, manage the fund on a day-to-day basis. Mr. Marquaire has been at LOIM since 2010, and worked alongside the previous lead PM (Mr. Bataillon) for 10 years managing the same European Equity strategy. Mr. Dionisio joined LOIM in February 2011. The PMs have 17 years' investment experience on average. Following the departure of Julien de Bournet in September 2015 the two co-PMs are currently supported by two analysts, one of which joined in mid-2013 and the other in December 2015.

The EHC Equity team is part of the wider Global High Conviction Equity team. The fund benefits from LOIM's separate trading desk and overall independent risk control framework.

TRACK RECORD
The fund total return since end December 2014 to end November 2015, is 19.7% (IA shareclass, net of fees) higher than the benchmark (MSCI Europe ND), 14.25%. Fund volatility compared to the benchmark is lower, with an annualised volatility of 19.9% (to end-November 2015) compared to the benchmark volatility of 22.9%. The fund has a Lipper Leader Consistent Return score of 5 (highest).

Since the beginning of 2015 to end November 2015 the fund AUM grew significantly from EUR643 to EUR1,275 (Source Lipper). The team monitors the capacity of the strategy which is set around EUR2.5bn, as a function of the market liquidity of the fund investment universe.

FUND MANAGER
LOIM is the asset management division of Swiss private bank Compagnie Lombard Odier SCA (Lombard Odier SCA; AA-/Stable/F1+.) LOIM managed EUR38.8bn (at end-September 2015) for institutional investors, third-party distributors and private clients, of which about 19% were in equity products.

RATING SENSITIVITIES
The rating may be sensitive to material changes in the investment or operational processes or market risk profiles of the fund. A material adverse deviation from Fitch's guidelines for any key rating driver could cause Fitch to downgrade the ratings. For example, notable structural deterioration in the fund's performance or further departures of key investment professionals may cause the rating to be placed "Under Review" or downgraded. Conversely, Fitch may upgrade the rating if the fund continues to outperform peers and its benchmark on a risk-adjusted basis over a longer-time period and when the analyst who joined the team in December 2015, is fully embedded in the team.

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.