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Laurent Crosnier, CEO and CIO, Amundi London

Amundi aims to stay ahead of the curve with strengthened VaR range



Amundi this week reaffirmed its position as a pioneer in the absolute return space with a strengthened range of VaR products in response to the upcoming UCITS IV Directive.



Amundi was one of the first asset managers to launch a VaR absolute return fund over 10 years ago: VaR 2. Of the EUR690billion in AUM, approximately EUR14billion is held in absolute return assets giving it a 7.6 per cent market share. VaR, or Value at Risk, was first pioneered by Long Term Capital Management in the ‘90s to calculate the probability of portfolio losses. Amundi’s VaR portfolios use a 95 per cent confidence rule, assuming normal market conditions.
CEO and CIO of Amundi London, Laurent Crosnier (pictured), heads up the investment team with Deputy CIO, Markus Krygier. Risk rigidity, said Crosnier, formed the backbone to Amundi’s VaR fund range. Two thirds of a fund’s portfolio is based on strategic views with one third coming from tactical trading. This, said Crosnier, allows them to enhance the risk/return profile by adding an additional alpha component.
Amundi’s AR funds straddle all the major asset classes from fixed income and currencies through to CTA and volatility: the latter being the most recent addition. “In London we have five portfolio managers managing our VaR products, two of whom manage volatility,” says Crosnier. As one would expect with UCITS-compliant products, all the funds are valued daily and provide daily liquidity. “Since July 2010 we have strengthened our VaR range by further improving the investment process and tightening risk control. The result is continued strong performance,” says Crosnier.
Risk allocation is a key focus of Amundi. By closely monitoring the risk budget of its portfolios Amundi is able to deliver enhanced performance, helped further by the fact that VaR funds are actively managed and diversified by asset, time horizon and manager experience. “We’ve had four black swans recently. Active management in the current geopolitical environment is key,” says Crosnier.
Increased liquidity and enhanced monitoring of intraday trades and limits have been introduced since last June to strengthen the VaR range. The overall aim is to become UCITS IV ready. Amundi plans to do this, depending on regulatory approval, by reducing the number of AR funds from 26 to 13, whilst maintaining eight mandates. Having larger funds will, the firm says, increase efficiency and allow for greater consistency. Eventually, it plans on having just six master funds: VaR 2, 2X4, 4, 8, 20, and Forex.
Speaking briefly on the overall investment process, Merrick Styles, Amundi Head of Absolute Return, said that liquidity risk in portfolios was measured using WALF: Weighted Average Liquidity Factor. “This gives me a number in terms of days,” says Styles. “If that number is, for example, 1.4, and I have a 10 per cent redemption, it gives me 1.4 days to achieve the liquidity target.” He added that Askari, a risk tool, is run daily to monitor portfolio positions.
Looking at performance, VaR 2 delivered 1.54 per cent in 2010 versus 0.44 per cent for EONIA. 2008, however, saw the fund record a loss of 2.09 per cent. Styles said this was because they “went into credit too early”. However, because Amundi uses a long-term philosophy, they were able to hold on to the positions, which paid off the following year: gaining 12.38 per cent.

“We’re living in a macro world. We believe in order to navigate this world you need a macro product and our VaR product line is exactly that. We’ve had a long time to calibrate our approach to the markets,” says Deputy CIO, Markus Krygier.


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