Theam quant funds
Why defensive strategies ?
Benefits of investing in defensive strategies :
- Leverage on sources of yield not naturally available with low risk.
- Mitigate the impact of market volatility.
- Diversify portfolios while controlling risks and capital costs.
- Implement fully transparent solutions.
- Optimise return on Allocated Capital (e.g. regulatory capital, economic capital and rating agency).
Typical investment process
See below how an equity investment process can be built to transform a pure directional risk into a yield-orientated investment.
In equities for example, a core portfolio of stocks selected based on fundamentals is complemented by the sale of short-dated call options (enhancing the yield and reducing the volatility) and by the purchase of long-dated put options aiming to improve the risk/return ratio compared to a direct investment in the stock strategy.
Investment Yield for Insurers
- Fixed income remains the primary driver of yield for insurance companies but as traditional strategies have generated declining returns in the low-yield environment, insurers face a difficult situation to help match guarantees on back-books or policyholders’ expectations.
- Insurance companies have been spurred to search for new investment opportunities, including alternative asset classes such as Long/Short investments. Yet they are sometimes wary of adding equity, lower rated corporate bonds or alternatives to their portfolio due to the high capital charges under Solvency II (SCR market ranging from 22.5% of a BB 5-year bond, 39% for equity and 49% for alternative assets).
- Moreover, these “performing” asset classes exhibit substantial volatility and drawdowns, that can lead to impairment (under IFRS or local GAAP).
- Volatility, in the full mark-to-market framework of Solvency II, can lead as well to uncomfortable variations of the SCR ratio by weighing on the available own funds.
Insurers facing both economic challenge and capital constraints
Source: Spence Johnson, “Deeper Perspectives” 2017 Source: Deloitte, Capital management in insurance survey 2015
Capital-efficient solutions of most asset classes
THEAM Quant - Equity Factor Defensive Funds
A diversified investment into the main factors driving equity returns with a protection overlay
The funds are a risk-balanced portfolios composed of four core equity factors – momentum, quality, low volatility and value – aiming to provide capital growth by being exposed to a basket of European equities and by implementing a systematic options strategy which aims at reducing risk by minimizing volatility.
THEAM Quant - Equity Income Defensive Funds
A solvency-friendly equity strategy
The objective of the funds is to provide income and capital growth (i) by being exposed to a basket of high-dividend equities and (ii) by implementing a systematic options strategy which aims at generating additional income and reducing risk by minimizing volatility in the fund.
High Yield Europe Defensive ("HYPE")
Innovative systematic strategy providing a participation to high-yield returns at the capital cost of investment grade
Credit spreads are not particularly low, while absolute yield is. This leads to a difficult choice to get yield. High yield is often ruled out, despite its effective returns. Find out more about our THEAM Quant – High Yield Europe Defensive.
The objective of the fund is to provide capital growth (i) by being dynamically exposed to a long position on European high yield credit and (ii) by implementing a systematic options strategy which aims at reducing risk by minimizing volatility and drawdown in the fund.
THEAM Quant - Multi Asset Diversified Protected
A low SCR protected fund exposed to an award-winning multi asset strategy based on trends
The Hedge Fund Journal’s article: “BNP Paribas’s THEAM Quant Funds Range” The Hedge Fund Journal has published in its August
Our experts are discussing the 2018 performance of the Equity Income Defensive strategies. To access the video, please contact us
Our experts are discussing the H1 2018 performance of the Equity Income Defensive strategies. To access the video, please contact
|Funds||Investment theme||Asset Class||Style|
|THEAM Quant - Equity Euro Long Dividends||Defensive Strategies||Equities||Dividends|
|THEAM Quant - Equity Eurozone Income Defensive||Defensive Strategies / Income||Equities||Defensive / Income|
|THEAM Quant - Equity Europe Factor Defensive||Factor Investing / Defensive Strategies||Equities||Defensive|
|THEAM Quant - Equity Eurozone Factor Defensive||Factor Investing / Defensive Strategies||Equities||Defensive|
|THEAM Quant - Equity US Factor Defensive||Factor Investing / Defensive Strategies||Equities||Defensive|
|THEAM Quant - High Yield Europe Defensive||Defensive Strategies / Income||Fixed Income||Defensive / Income|
|THEAM Quant - Multi Asset Diversified Protected||Liquid Alternatives / Defensive Strategies||Multi-Asset||Protected|
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