The fund is managed by Lombard Odier Investment Managers (LOIM). KEY RATING DRIVERS The affirmation primarily reflects the discipline of the fund’s systematic multi-asset risk-based investment approach, supported by solid research studies and advanced analytics. Additional hires to the team over the past twelve months demonstrate the commitment of LOIM to the strategy.
Fund Presentation All Roads is a sub-fund of LO Funds, Lombard Odier’s Luxembourg SICAV, which is UCITS IV-compliant. Launched in January 2012, All Roads is a multi-asset fund with EUR384m of assets at end-January 2016. Investment Process The fund uses a risk-based approach, implemented in a robust manner, mainly through liquid derivatives across five asset classes.
A risk-based, “smart beta” approach is also used within each asset class. Recent research-driven adjustments to the purely systematic process have led to the introduction of alternative risk premia and improved drawdown management techniques. Formal rules trigger a rebalancing of the portfolio against an equal risk-weighted allocation derived from long-term asset correlations and short-term volatilities. The fund adjusts its overall risk budget based on dynamic drawdown management, a function of fund performance, risk measures robustness and market risk appetite.
Resources following the appointment of a new head of multi assets in 2015, three additional hires were made in the multi-asset group now consisting of 10 investment professionals. The fund also benefits from LOIM’s dedicated trading desk and overall risk control framework. The proprietary multi-asset quant platform is the core system used for portfolio construction. The platform is linked to Bloomberg (AIM), the fund’s core front office system used for portfolio monitoring and trading. Risk management uses the Barra system to independently review portfolio construction.
Asset Manager LOIM is the asset management division of the Swiss private bank Lombard Odier SCA (AA-/Stable/F1+). LOIM managed EUR42.7bn at end-December 2015, including USD3.1bn in risk-based strategies. The infrastructure is well suited to the investment process. Track Record LOIM has performed as expected, given its systematic risk-based approach. It fell short of its long-term objective in 2015 but managed to adhere to its risk budget limits. The fund has underperformed Fitch’s internal risk parity peer group since inception but shows a lower volatility and better management of drawdowns than peers.
RATING SENSITIVITIES The rating 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. For example, this may be manifested in significant structural deterioration in the fund’s performance resulting from a model error or inadequacy, as measured by drawdown or underperformance relative to objective and peers. Fitch sees limited potential for positive rating action at this stage due to the fund’s already high rating and recent team changes.