Flash Coronavirus – G Fund Alpha Fixed Income



Over one year (from 12 March 2019 to 12 March 2020), G Fund Alpha Fixed Income has grown by 1.25% (share class I-C EUR LU0571101715), with a volatility of 0.80%, while its reference index, the capitalized EONIA, is down -0.41%.


  • Over one year (from 12 March 2019 to 12 March 2020), G Fund Alpha Fixed Income has grown by 1.25% (share class I-C EUR LU0571101715), with a volatility of 0.80%, while its reference index, the capitalized EONIA, is down -0.41%.
  • The fund, which aims to be decorrelated from the rate and credit directional risks, has registered a performance of -0.17% since the start of the year (as on 12 March 2020). Over the same period, its reference index, the capitalized EONIA, is down -0.09%.
  • The fund entered the coronavirus crisis with a particularly abundant core pocket, which is the pocket containing the most liquid assets.
  • The current dislocation of the credit market is creating price imbalances, which provide the G Fund Alpha Fixed Income fund with future opportunities that the fund will aim to seize.


  • G Fund Alpha Fixed Income is a fund that aims to provide absolute return without taking on directional market risks (interest rate risk and credit risk).
  • The fund has a liquid, low-volatility profile with VaR-based risk management(3) (maximum 1-month 2.5% VaR, with a confidence interval of 99%).
  • The fund aims to implement arbitrage strategies in the credit universe, with one long leg(1) (usually a bond) and one short leg(1) (sale of an interest rate future, combined with a purchase of single-name CDS(2) or basket CDS).
  • The buying and selling of derivatives are therefore for hedging purposes and not for speculation.



Since the start of the year, G Fund Alpha Fixed Income (share class I-C EUR LU0571101715) has a net performance of -0.17%, as on 12 March 2020, which is 8 basis points below its reference index, the capitalized EONIA (-0.09%).

Net performance 2020

Source: Bloomberg, as on 12 March 2020 G Fund Alpha Fixed Income share class I-C EUR: LU0571101715. Past performance is not a reliable indicator of future performance

Over these early months of the year, the fund has again demonstrated its decorrelation from the directional risks of the rate and credit markets: as can be seen since the beginning of March, even at the height of the generalized swings towards risk aversion on these markets, the daily performance of the fund could be positive or negative.

Our credit protections via iTraxx Xover(4) worked well, sometimes protecting us more than expected. This reflects the fact that this instrument is used by many investors as a macroeconomic hedge in the event of major movements of risk aversion. By contrast, very recently, less correction than anticipated has been provided by single-name CDS (spread widening), which are intended to offset the spread widening on the bond market.

The rise in volatility of our portfolio instruments has had the effect of increasing the volatility of the fund, leading to more erratic behaviour.

Over longer investment horizons, the performance of G Fund Alpha Fixed Income and its reference index are shown below:

Net performance

Source: Bloomberg, as on 12 March 2020 G Fund Alpha Fixed Income share class I-C EUR: LU0571101715. Past performance is not a reliable indicator of future performance



  • At the beginning of the year, we managed to be particularly active on the primary market, by grabbing some attractive premiums, in particular on the green bonds market, for which enthusiasm has remained unabated.
  • We also established two new negative basis strategies on two French companies (purchase of a bond and purchase of a hedge via a derivative having the same maturity on the same issuer, aiming for convergence of valuations between the two instruments), with a positive carry.
  • We also maintained our strategy for implicit decompression of CDS indexes (purchase of iTraxx Xover and sale of iTraxx Main(4)).



Precautionary positioning

The Alpha pocket(5) today is in a low range, corresponding to our market observation: for several months, up to February, the market was resolutely optimistic, with premiums tightening indiscriminately, leaving little room for attractive alpha strategies.

We therefore adopted a wait-and-see attitude, with an abundant Core pocket, containing the highest-liquidi assets, aiming for a resurgence of volatility, which is a source of dislocations, and therefore of opportunities for our fund.

The current status of the portfolio, distributed between its two pockets, is shown below:

Core pocket / Alpha Pocket

Source: Groupama Asset Management. Data as on 13 March 2020.

Coming opportunities to be seized in the credit universe

Arbitrage opportunities are fast approaching. During market storms, we do not feel any need to hurry, because the dislocations can intensify, and so we wait until the end of the sequence of extreme volatility before adapting our positioning. We have sufficient liquid assets in our portfolio to take advantage of price imbalances.

Also, companies are not able to indefinitely postpone their financing and/or refinancing programme. After a period of volatility on the markets, these companies will return to the markets with attractive premiums that we will attempt to grab.

Strategies that have not yet delivered their full potential

With the current dislocation of the markets, numerous alpha strategies have not yet delivered their full potential: this is especially the case for the negative basis strategies. Although we judge that their rationale remains intact, some of these strategies have suffered, a fact that increases their appreciation potential.

A strategy adapted to the environment of low interest rates

In an environment of often negative interest rates and high volatility, the search for absolute return with a relatively low-volatility approach decorrelated from the markets can make sense in fixed-income type asset allocation.

We therefore remain confident in the investment process and in our ability to generate added value over the next few months.

The main risks associated with the fund are: interest rate riskcredit riskforeign exchange riskliquidity risk, capital loss risk, counterparty riskderivative instrument risk and risk intrinsic to the use of speculative instruments.


(1) Long: a buying position on the instrument / Short: a selling position on the instrument

(2)CDS: Credit Default Swaps. A CDS is a derivative product that hedges against the risk of default by a debt issuer. Single-name: CDS hedging against the risk of default by a single issuer.

(3) VaR : Value-at-Risk corresponds to the amount of losses that should only be exceeded with a given probability over a given time period

(4)iTraxx: indices based on baskets of CDS products. iTraxx Xover: index of BB and BBB rated CDS products. iTraxx Main: index of high credit quality (Investment Grade) CDS products

(5)Alpha: a measure of the ability of an investment manager to create value by being able to detect the securities that yield better returns over a given period than would normally be expected given their level of risk.



This document is not intended for “non-professional” European Union investors, as defined in “MiFID” (EU Directive 2004/39/EC dated 21 April 2004) or any other local regulation. Similarly, in Switzerland, this document is not intended for investors not classified as “qualified investors” under the applicable legislation. As a general rule, this document must not be transmitted to private clients or individuals as defined in any legislation, nor to “US Persons”.

This document contains information concerning G FUND – ALPHA FIXED INCOME, a compartment of G Fund (also referred to as “the SICAV”), a Luxembourg-based undertaking for collective investment in transferable securities (UCITS), covered by part I of the Law dated 20 December 2002 and constituted in the form of a “SICAV”(Société d’Investissement à Capital Variable – a European publicly traded investment company structure for open-ended funds). The SICAV is registered with the Luxembourg Trade and Companies Register under number B157527. Its registered office address is 5, allée Scheffer, L-2520 Luxembourg. G Fund was authorized for trading by the Luxembourg financial authority CSSF (“Commission de Surveillance du Secteur Financier”).

Investors are advised that not all compartments of the SICAV are necessarily registered, authorized for commercialization or accessible to all investors in all jurisdictions. Before subscribing to a compartment, the client must take due note of the complete prospectus of the SICAV and of its latest annual and half-yearly reports and its articles of association. These documents are available free of charge at the registered office of the SICAV or at the registered office of the authorized representative accredited by the competent authority in each jurisdiction concerned.

Investment in the compartments of the SICAV involve risks. Investors must fully inform themselves of these risks before any subscription and must make sure that they have understood the present document. We recommend that all potential investors contact an advisor to determine whether this investment is suited to their profile.

The performance of a compartment is not guaranteed but can vary both upwards and downwards. The past performance of a compartment is not a reliable indicator of the future performance of the same compartment. Performance is quoted excluding the costs and commissions charged for subscription/redemption.

This document is not an investment recommendation. Similarly, this document does not constitute an offer of purchase or request to sell in countries where the compartments of the open-ended fund are not authorized to be traded or where any such offer or request would be illegal.

The commercial teams of Groupama Asset Management, the G FUND management company, are at your service if you wish a personal financial recommendation.

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