Groupama Asset Management launches a new fund invested in corporate hybrid bonds

27/04/2020

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Groupama Asset Management has officially confirmed the launch of G Fund - Hybrid Corporate Bonds, a new fund invested in corporate hybrid bonds, focusing mainly on the countries of the OECD and on issuers with Investment Grade credit rating. The aim of the fund is to generate a higher yield than is obtained from the conventional corporate bonds universe, through rigorous selection of the hybrid securities included in the fund.

Focus on the characteristics of hybrid bonds

As a reminder, a hybrid bond is a debt instrument with a very long maturity, or even without maturity (a perpetual bond or “perp”) issued by a company, with the possibility for the company to redeem the debt after a fixed number of years (generally after 5 years). Hybrid bonds combine characteristics of both conventional bonds and equity – fixed coupon, optional call date, distribution of discretionary coupons, possibility of no maturity date (perpetual bond).

 

Investment approach founded on powerful analysis capacity

The investment strategy of the fund relies on high selectivity of the issuers. This bond-picking approach is based on fundamental analysis of the issuing companies, comprising strategic analysis (management, competitive position), financial diagnosis (balance sheet analysis, growth and profitability, cash-flows etc.), budgeted income statement analysis and analysis of the clauses specific to the hybrid debts. At the same time, the team draws on top-down analysis, enabling it to take into consideration the macroeconomic, geographic or sectoral environment liable to have an impact bond selection.

As a result, the portfolio composition does not reproduce the biases of the hybrid universe, so that higher yield can be obtained than from the senior debt universe while simultaneously reducing the volatility induced by the high degree of concentration, by sector and issuer, of the hybrids indexes.

“Given their intrinsic characteristics, hybrid bonds are attractive supplementary and diversification assets for the purpose of injecting dynamic performance into a core portfolio of conventional corporate bonds. As part of our selective bond-picking approach, we seek to optimize risk-adjusted return, by selecting the most attractive issuers and hybrid debt issues from this point of view. This hybrid / senior differential provides a potential gain of several hundred basis points, while retaining the advantages of the company’s Investment Grade rating,” explains Maya El Khoury, co-manager of the G Fund – Hybrid Corporate Bonds.

“We have conceived this fund as a proposed new alternative for investors, especially institutional investors and multi-management professionals, in an environment of structurally low interest rates. The expertise of Groupama Asset Management in fixed-income management, combining rigorous analysis of issuers and issues, management of interest rate risk and credit risk and, finally, the integration of ESG* criteria, enables us to identify sources of relative value,” adds Guillaume Lacroix, co-manager of the fund.

As on 31 December 2019, Groupama Asset Management had 68,2 billion euros of fixed-income assets under management.

 

Regulatory information on G FUND Hybrid Corporate Bonds 

Description G Fund Hybrid Corporate Bonds IC
ISIN  Code LU2023296168
Legal status Compartment of open-end investment fund (“SICAV”)
Management Aims The management aim is to seek growth of the invested capital over the medium term through discretionary management over a recommended investment period of more than 3 years. For this purpose, the portfolio is invested in corporate hybrid bonds, prioritizing Investment Grade rated companies in the OECD zone.
Benchmark Given its management aim, this compartment does not seek to replicate a benchmark or reference index.
Type of investment fund UCITS
Capitalization/ Distribution Capitalization
Total Net Assets 43.08 million euros as on 31/03/2020
NAV valuation period Daily
Subscriptions / redemptions Every working day up to 12 noon, Luxembourg time – NAV unknown -Settlement D+3
Maximum management fees (%) (excluding performance commissions) Fixed: 0.70%

Variable: None

Entry charge(%) Not paid into the UCITS: 4%

Paid into the UCITS: None

Redemption charge(%) Not paid into the UCITS: None

Paid into the UCITS: None

Custodian bank CACEIS BANK Luxembourg

 

*ESG Criteria:  Environmental, Social and Governance criteria.


 

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Edited by Groupama Asset Management – Headquarters : 25 rue de la ville l’Evêque, 75008 Paris – Website: www.groupama-am.com