Groupama AM drops hedge fund strategy

French group Groupama Asset Management has been forced to radically adjust the long/short strategy of Groupama Alpha Euro Stock due to unsatisfactory performance in recent months.

The company said the fund’s recent performance and volatile liquidity levels did not correspond to its development objectives, which triggered the decision to reposition the fund’s investment strategy.

In a transformation that sees the fund take a new name, FCP Groupama Statique 2, it will no longer be structured as an OPCVM (Ucits), instead becoming a fonds commun de placement (FCP). This will enable the fund to invest up to 100% in Ucits products, which was previously limited to just 10%.

The fund will cut its holdings in convertible bonds and long/short strategies will no longer be pursued. Groupama AM said this would ensure the effectiveness of the top down and bottom up investment approach that will be adopted from now on.

The fund will consequently drop its active management style aimed at delivering absolute returns in favour of a discretionary management style focused on markets fluctuations, such as those in equity and bond markets.

FCP Groupama Statique 2’s selection process for Ucits funds will follow two steps applicable to both internal Groupama AM funds and external managers.

First a quantitative filter will be applied to determine funds’ risk and performance characteristics. Then qualitative assessment will take place to evaluate management style.

The French l’Autorité des Marchés Financiers (AMF) approved the changes to the fund’s strategy on December 28 2011.

The changes will be live from January 5 2012. Exit fees will not be charged to investors who choose to withdraw from the fund in the following three months.

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