The Groupama Cash Equivalent fund becomes Groupama Ultra Short Term Bond

10/04/2019

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Groupama Cash Equivalent, a fixed-income UCITS eligible as a "cash equivalent" fund, has been renamed Groupama Ultra Short Term Bond. This change corresponds to a need for clear identification: the new name closely corresponds to the various investor target groups for which this type of investment solution is popular.

The term “cash equivalent”

According to the market position defined in 2011 by the relevant French financial authorities and market regulators (AMF, AFG, AFTE and ‘AF2I), a UCITS is eligible to adopt the name “cash equivalent” if it complies with a set of criteria: the investment must be short-term, liquid, easily convertible into a cash amount and relatively insensitive to the risk of variation.

For example, the recommended investment period must not exceed 12 months, and the chosen money-market benchmark index must not have a volatility more than 50 base points above the EONIA index  The final maturity of the securities must not exceed 36 months, while the weighted average maturity (WAM) must not exceed 6 months, and the weighted average life (WAL) must not exceed18 months.

The position of the French Financial Markets Authority (AMF) on 23 September 2011 specifies that “UCITS other than money-market and short-term money-market UCITS (…) must be analyzed on a case-by-case basis, to verify that they fully satisfy the eligibility criteria”. These criteria provide auditors with an objective method of analysis for evaluating any UCITS denominated as “cash equivalent”.

The strategy of Groupama Ultra Short Term Bond

Eligible as a cash equivalent fund, Groupama Ultra Short Term Bond (formerly Groupama Cash Equivalent) is invested in investment-grade fixed-income and money-market instruments denominated in euros. The management aim is to generate better performance (net of management fees) than money-market funds, while retaining a similar level of liquidity and volatility to these funds.  Several performance drivers are exploited to achieve this aim: for example, credit and interest-rate sensitivity, geographical and sectoral diversification of asset allocation and rigorous selection of issuers are core features of the investment strategy.

Groupama Ultra Short Term Bond was launched in 2015 with the aim of providing a solution that allowed managers to extend the period conventionally proposed by money-market management, in order to offer a more attractive risk./reward trade-off.

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With this short-term fixed-income solution, our aim is to offer investors a yield premium of 10 to 30 base points compared to classic money-market solutions, while preserving an investment universe and risk positioning very similar to the money market

Thomas Prince
Head of Money Market Management

In an environment of historically low interest rates, Groupama Ultra Short Term Bond appeals especially to investors looking for performance and willing to inject extra dynamics into their cash management by introducing exposure to short-term securities, while tightly limiting the duration.
The fund is also addressed to long fixed-income investors who consider the cash-equivalent universe as a suitable temporary standby medium for their liquidities, offering potentially higher rewards than money-market funds.

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We wished to rename the fund, so that its new name would closely reflect these investor typologies. This solution is not only popular with corporate treasurers but also with a much broader spectrum of institutional investors, familiar with the fixed-income market and with a slightly longer-term investment horizon. Additionally, we wanted to internationalize the fund name, because our investor client base extends far beyond France

Guillaume Berthier
Marketing Manager

As of 29 March 2019, Groupama Ultra Short Term Bond has total assets under management of 1.27 billion euros. One third of the fund’s assets are invested by institutional investors, one third by corporate treasurers (“corporates”) and one third by distribution professionals. The performance of Groupama Ultra Short Terme Bonds part IC is +0,14% since the beginning of the year* (compared to -0.09% for the Eonia capitalized index).

 


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