perspectives october 2009
macro Analysis What’s about the recovery? Asset Allocation Feeling the benefit of a global drip-feed Product Focus Natixis Absolute Swap Arbitrage : one year
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Macroeconomic Analysis
4
Asset Allocation Market Data
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Product Focus
Natixis Asset Management Limited Liability Company Share Capital 50 434 604,76 € RCS Number 329 450 738 Paris Regulated by AMF under n°GP 90-009 Registered Office: 21 quai d’Austerlitz 75 634 Paris, Cedex 13 - Tel. +33 1 78 40 80 00 www.am.natixis.com Natixis Multimanager Subsidiary of Natixis Asset Management A French simplified joint-stock company Share Capital of 7 536 452 euros - RCS Number 438 284 192 Paris Regulated by AMF under n°GP 01-054 Registered Office: 21 quai d’Austerlitz 75 634 Paris, Cedex 13 - Tel. +33 1 78 40 32 00 www.multimanager.natixis.com
11 News
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Perspectives is a Natixis Asset Management's publication - Natixis Asset Management - Communications Department - Business Development - communication-nam@am.natixis.fr
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Publishing Director: F. Lenoir Editorial Committee: T. Benoist, F. Delorme, S. de Quelen, K. Massicot, Ph. Le Mée, C. Michel, R. Monclar, F. Nicolas, C. Point, M-L. Rouy, B. Thiery, Ph. Waechter Coordination - Writing: N. Clémot Head of design: F. Dupertuys Contributors: B. Boulay-Megard
Editorial The pick-up in activity that began in the summer looks set to continue, going by the improvement in several key indicators. Activity seems to be returning to more robust levels, as budgetary and monetary policy interventions have taken effect. According to Philippe Waechter, Chief Economist, the mutualization of risks previously taken by the private sector will have long-term consequences [Macro Analysis page 2]. These consequences are already Philippe zaouati reflected in burgeoning public deficits Head of Business Development and unprecedented ballooning of central bank balance sheets. Philippe Waechter believes that significant resources will be needed in order to scale these back, which will weigh on the real economy for years to come. Franck Nicolas, Head of Global Asset Allocation and ALM, confirms that the recovery is continuing, led by a steady improvement in fundamentals. He sees investors regaining an appetite for risk, which will boost riskier assets [Asset Allocation page 4]. Natixis Asset Management, a recognized pioneer in SRI with experience spanning 25 years, is putting the spotlight on Socially Responsible Investment (SRI) this fall. Fourteen of its funds have been awarded the Novethic SRI label, testifying to the company’s commitment and expertise in this field and Natixis Asset Management is developing expertise in asset management that takes into account environmental factors. It has set up a Climate Change Scientific Committee chaired by Carlos Joly*, an acknowledged figure in the world of responsible and sustainable investment [News section page 11]. This issue also includes a summary of Natixis Asset Management’s international offer [page 6 to 8], with a particular focus on Natixis Absolute Swap Arbitrage managed by Dieudonné Djimi [Product Focus page 9]. The fund was created one year ago.
Awards SRI Labels Novethic - 2009 The Novethic* SRI Label has been awarded to fourteen SRI funds managed by Natixis Asset Management and targeted at its direct clients and, more specifically, at clients of the Caisses d’Epargne and Banques Populaires networks. Natixis Impact Actions Euro Natixis Impact Aggregate Euro Natixis Impact Cash Natixis Impact Europe Equities Fund Natixis Impact Life Quality Natixis Impact Euro Corporate Bond Fund Insertion Emplois Dynamique Insertion Emplois Sérénité Ecureuil Bénéfices Emploi Ecureuil Bénéfices Environnement Ecureuil Bénéfices Responsable Fructi Euro ISR Fructi H2O Fructi ISR Obli Euro These Novethic SRI Labels replace Novethic’s former rating system which ran from “aaa” for the best funds to “b” for the less good. > Read more on page 11 * Novethic is the French centre for research on Corporate Social Responsibility (CSR) and Socially Responsible Investment (SRI). Novethic is also an expert media resource on sustainable development (www.novethic.fr). The figures mentioned refer to previous years. The reference to any rankings or awards received by it or its manager cannot be interpreted as indicating the future performance of the funds or of their managers.
Enjoy reading it.
*Carlos Joly is an SRI specialist known worldwide for having co-chaired the working group that drafted the Principles for Responsible Investment (PRI).
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October 2009
1
Macro Analysis What’s about the recovery? Philippe Waechter Chief Economist
The Context The main sources of uncertainty are the employment dynamic, the exit strategies for monetary and fiscal policies and the risk of acceleration in inflation. .
The Key Point With the low point in economic activity behind us, the signals are now more positive. Questions nonetheless remain as to the profile of the recovery.
The Challenge The improvement in the situation is sometimes encouraging regulatory changes to be postponed and a change in the solidarity established at the height of the crisis, notably at international level.
Since the fall-off in economic activity in autumn 2008, the uncertainties have been about the way in which the economic system was going to react. The first concern was the evidence of a further, relentless deterioration in the environment which would have validated a dynamic close to that of the 1930s. The authorities thus adopted a very pro-active stance in assuming a large part of the risk taken by the private sector. This mutualization led to a spectacular increase in public debt and an unprecedented ballooning in central bank balance sheets. This economic policy response enabled more uniformity to be instilled in the environment and avoided the adjustment being borne solely by consumers, as had been the case during the 1930s in the United States. This coordinated response from the monetary and fiscal authorities enabled stabilization in activity followed by an upturn. The recovery is perceptible in numerous economic statistics: thus, despite a modest level of activity, the order dynamic is more robust. The outlook is being transformed by more optimistic expectations. In view of the major downturn in activity lasting more than a year, the rebound could be strong. A deep recession generally coincides with a rapid and spectacular recovery if we believe the correlation seen in the past, notably in the United States. This short-term trend is, thus, reassuring although numerous questions remain and are fuelling concerns.
n The activity profile The employment issue The most impressive aspect of the crisis is the magnitude of the adjustment in employment, even if the fall witnessed was consistent with the downturn in activity. If the improvement in the economic outlook currently underway may not suddenly translate into a change in the employment trend, a marked change in behavior has already been seen in the jobs market. In the United States, for example, the unemployment figures peaked at the end of March. Since then, the number of new jobseekers has slowed and job losses have been more limited. In other words, although the activity indicators look sufficient to allow a less brutal functioning of the employment market, they are not yet robust enough to prompt a significant improvement in the latter. The trend in the jobs market will thus remain complex: employment will probably start to improve in the coming months (thus reflecting the gradual recovery in economic activity) but the unemployment rate may well continue to increase over the same period. Employment effectively represents a flow, whereas the unemployment rate indicates a stock dynamic and these profiles, which are generally closely-related, can diverge during economic inflexion points.
2 October 2009
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What is the activity profile? A scenario indicating a rapid return to recession is not relevant, in our view, since the so-called double-dip configuration supposes a new negative shock to activity. Whereas we favor an improvement in the latter even if questions remain as to the speed of this recovery. In the current environment, the change in trend will take place notably via the rebuilding of inventories. This move will be conditioned by the uncertainty reigning over the future direction in activity. If perception is very positive, business leaders will not hesitate to reconstitute their inventories but, in the event of doubts, they will not. This view of the environment will be closely linked to governmental measures to support activity, the consumer effectively remaining very cautious on spending.
What is the future for economic policy? As indicated at the G7 meeting in London in early September, the authorities do not want to unwind the measures taken last autumn too rapidly. A sudden policy shift would probably have harmful consequences for employment. In 2010, the question of exit strategies will, however, be raised when confronted with the need to return, within a finite period, to a more ‘normal’ stance for the different authorities involved. The central banks will need to
manage the mopping up of liquidity and may be forced to adjust interest rates. Governments will also need to establish the milestones of a strategy which will enable stabilization, then a reduction, in public debt. The stakes are complex: you only have to imagine a central bank, such as the ECB, not being able to act totally independently of another central bank (like the Fed). The same is true for fiscal policies where a scheduling between fiscal and monetary policies will be necessary. These intersecting adjustments will be essential to both the activity trend and the formation of the expectations of the economic players and investors.
A return of inflation? The adjustment towards a new overall balance must take place without the return of inflation. Prioritizing an adjustment by inflation would effectively lead to a spectacular increase in interest rates and by increased uncertainty as to economic activity. The stabilization in the public debt/GDP ratio would then be postponed. Within the framework of exit strategies, the central banks thus prefer to mop up excess liquidity in order to avoid it washing around the economy when the strains on production capacity become more pronounced.
n The functioning of the global economy
In addition to the activity profile, questions remain as to the functioning of the global economy. The first relates to the banking system. If the question of tighter regulation seemed settled a few weeks ago, it now appears less clear, particularly in the United States where there is a dual issue: • ‘Must the banking system adjust itself automatically in an endogenous manner or must it be constrained by tighter regulation?’ In the United States, the balance of power between the government and the major banks would justify rather the first approach within a context of recovery which benefits the latter. • ‘Is it preferable, within the framework of tighter regulation, to take action on the capital of the banks or on remuneration?’ There are opposing positions on this aspect: Europe is concerned about the direction of remuneration while the United States favors the capital increase. The second question is that of the articulation between the different geographical zones. The great solidarity that existed during the downturn in economic activity may be in the process of disappearing during the economic recovery phase. If the situation continues
to improve, relations between Asia, the United States and Europe are going to change at the risk of creating new strains. This element will give a clear signal as to the way in which the geography of global activity will be established and thus on the sources of growth in the next few years. The significant weight of the emerging countries, whose banking systems have been far less affected by the financial crisis, may take on a new type of importance and come to shape the new global geography.
Conclusion In the next few months, the global economic trend will remain complex with sometimes contradictory factors and behavior. The signs of an improvement in economic activity are being reflected in the revision of growth figures for 2010. However, there is a lag effect between the adjustment of certain indicators and this is liable to prompt delays, hesitation and sometimes fragilities. This will make for a fascinating next few months.
Written on 25/09/2009
United States: depth of the recession and scale of the recovery GDP growth measured over the four quarters following each recession
Example: in 1957, the recession reached - 3.5 % at its low point and the ensuing recovery approached + 9.5 % over the four quarters following the exit from recession.
Scale of the recovery
2008: depth of the recession identified to date
Depth of the recession Source: Factset - Calculation: Natixis Asset Management
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October 2009
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Asset Allocation Asset allocation: feeling the benefit of a global drip-feed The end of the 2009 summer vacation period brought no change to the tone that has dominated financial markets since March. Risky assets continued their progress, driven by steadily improving fundamentals and a natural resurgence in investors’ appetite for risk.
Franck nicolas Head of Global Asset Allocation & ALM
Our recommendations by asset class Fixed Income
Risk categories
Risk subcategories
Tactical allocation* Aug 09(1) Sept. 09(2)
Fixed income equities
= +
fixed income United States
= +
-
-
Euro UK Emerging countries Japan
= -
= -
=
=
=
=
Corporate
+
+
United States Euro
+ +
+ +
UK
+
+
Japan
=
=
CURRENCIES
Dollar
=
=
(against the euro)
Yen
=
=
Pound
=
=
=
=
=
=
Euro issuers Equities
COMMODITIES Oil Gold Scale from -- to ++
Curiously, the current period is not particularly risky for bond products. Despite the background of recovery, central bankers in industrialized countries are likely to keep an accommodating bias to their monetary policies for at least another two quarters. This limits the scope for resurgence by long yields, even if the asset class seems to have exhausted its upside. For others reasons, credits also seem to have reached a ceiling. Gains by the credit markets have actually outstripped those by equities. As a result, spreads are close to the levels seen before Lehman Brothers collapsed, while equities have only made good half of their postLehman slump. Natixis Asset Management therefore decided to start reducing exposure to both sovereign and corporate bonds, though still on a fairly marginal scale at this stage.
Equities The Investment Committee remains bullish on equities, even after the recent sharp rally. The G20 nations said current support measures will stay in place and it seems at present that, provided the world economy gets this dripfeed, news flow will remain good. Companies slashed costs massively when the crisis broke and any recovery in orders will have a direct impact on profits as the need to rebuild inventories provides a recurrent source of business. Operating margins should therefore widen.
Once this has been gradually incorporated into analysts’ forecasts, valuation multiples could fall slightly as their denominator rises. This would make the market look less expensive, in light of recovering earnings. The withdrawal of public stimulus packages, the deficits that they will leave behind and the resulting fiscal pressure to help pay for the crisis, will all take their toll. But the market is not yet thinking about this prospect.
Currencies As usual when recovery looms, capital is flowing out of the US and this is driving the dollar down. The trend could continue in the short term but from 2010 expectations of faster rate hikes in the US than in Europe should once again favor the greenback. For the moment, allocations continue to avoid dollar exposure as it is still a bit too soon to start playing this forecast.
Commodities Agricultural commodities disappointed. They could have been a natural sequel to the oil rally seen in the spring. The Natixis Asset Management Global Allocation team therefore prefers to play the recovery investment theme via industrial metals. These are benefiting from strong demand as industry restocks and we can expect emerging market nations to continue pursuing development through infrastructure projects.
(1) Investment committee on 30/07/2009. (2) Investment committee on 02/09/2009. * weighting gap v.s. strategic allocation of an investor.
Written on 18/09/2009
4 October 2009
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Market Data As of 30/09/2009
France CAC 40 CAC Mid 100 IT CAC 20 SBF 120 SBF 250
Europe MSCI Europe Euro Stoxx 50 DAX Footsie
United-States Dow Jones S&P 500 Nasdaq Brent Crude Future
Asia Nikkeï Hong Kong Singapore Shanghaï
World MSCI World
Value 3 795.41 6 179.50 3 388.14 2 775.79 2 712.55
Value 84.28 2 872.63 5 675.16 5 133.90
Value 9 712.28 1 057.08 2 122.42 69.07
Value 10 133.23 20 955.25 2 672.57 193.50
Value 1 126.98
1 year -5.87% 5.02% 1.18% -4.67% -4.56%
2009 17.94% 39.74% 16.39% 20.11% 20.49%
1 year -5.82% -5.45% -2.67% 4.72%
2009 21.39% 17.18% 17.98% 15.78%
1 year
2009
-14.72% -9.37% 1.93% -29.64%
10.66% 17.03% 34.58% 51.50%
1 year
2009
-10.01% 16.31% 13.30% 45.76%
14.38% 45.65% 51.72% 74.46%
1 year -4.69%
2009 22.47%
Money Market Rate Eonia Euribor 3 months Euribor 6 months Euribor 1 year Fed Funds
0.533% 0.753% 1.016% 1.236% 0.070%
1 year -3.640 -4.524 -4.361 -4.259 -1.960
2009 -1.819 -2.139 -1.955 -1.813 -0.020
Fixed Income Rate 5 years French Treasury Bond 5 years USTN 10 years French Treasury Bond 10 years USTN 30 years French Treasury Bond 30 years USTN
2.518% 2.308% 3.536% 3.302% 4.065% 4.044%
1 year -1.547 -0.678 -0.809 -0.539 -0.666 -0.276
2009 -0.215 0.756 0.122 1.088 0.340 1.376
Currencies Value Euro/Dollar Euro/Yen (100) Euro/Sterling Dollar/Yen
1.462 130.873 0.914 89.535
1 year
2009
4.06% -12.24% 15.98% -15.66%
5.15% 3.86% -5.47% -1.23%
The monthly Index Bank of Sweden interest rates In an environment posing little threat of resurgent inflation, at the start of July the Bank of Sweden adopted a highly unusual policy stance. It cut its key repo rate to 0.25% and simultaneously cut its deposit rate (the rate paid on the reserves that banks place with the central bank) to -0.25%. At its July 2 meeting it also said that these rates would be kept unchanged until fall 2010. So, we see the central bank both giving a firm commitment on its policy rate and pursuing the original tactic of a negative deposit rate. The aim is to incentivize banks to restrict the reserves they lodge with the central bank and thereby encourage them to lend more. Any change in the Bank of Sweden’s commitments to the duration of these very low interest rates could signal a shift in behavior by central bankers. In that case, watch long-term interest rates carefully. Source: Natixis Asset Management
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October 2009
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Overwiew of our international Product range Sub funds of the NIF (Lux) I SICAV managed by Natixis AM These 7 sub funds of the Natixis International Funds (lux) I SICAV reflect the key expertise of Natixis Asset Management
Natixis Euro Aggregate Plus Fund ic
e-Mér
elanné
eD Isabell
Benefit from a broad range of fixed income investment opportunities
• Investment universe: Mainly Euro denominated government or private issuers rated Investment / Diversifying fixed income assets • Benchmark: Barclays Capital Euro Aggregate • Minimum recommended investment period: 3 years
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0161120547 LU0391146155 LU0161121271 LU0390502184
Natixis Global Inflation Fund Get the most out of diversification in inflationindexed bonds in a global universe
tard
Po Sophie
• Investment universe: International inflation-linked bonds • Benchmark: Barclays World Government Inflation linked all maturities Index hedged in euro • Minimum recommended investment period: 2 years • Risk Indicator: Target tracking-error ex ante of 2%(maximum)
H-I, A H-I, D I, A I, D R, A R, D
USD USD EUR EUR EUR EUR
LU0390502267 LU0390502341 LU0255251166 LU0255251596 LU0255251679 LU0255251752
Natixis Impact Euro Corporate Bond Fund rbier
e Ba hristin
C
Benefiting from the SRI expertise of Natixis Asset Management through a socially responsible portfolio of investment grade corporate bonds
• Investment universe: Mainly Euro-denominated investment grade debt securities issued by OECD as well as cash, money market instruments or other securities • Benchmark: Barclays Euro Aggregate Corporate Index • Minimum recommended investment period: 3 years
See the full prospectus which is the only legally binding document.
6 October 2009
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I, A I, D R, A R, D
EUR EUR EUR EUR
LU0155376477 LU0391146072 LU0155380156 LU0390502770
Natixis Emerging Europe Fund de
ndra u Belo
ie
Matth
éret
ois Th
Franç
Get the most out of the growth in the emerging European zone as part of a conviction management strategy
• Investment universe: Emerging Europe Equities • Benchmark: None (MSCI Emerging Europe Index: indicative only) • Minimum recommended investment period: 5 years • Risk Indicator: Target tracking-error ex ante between 6 and 10
I, A I, A I, D R, A R, A R, D
EUR USD USD EUR USD USD
LU0147917792 LU0095830922 LU0095831060 LU0147918923 LU0084288595 LU0084288678
Natixis Europe Smaller Companies Fund Benefiting from the potential of European Small & Midcaps within the scope of a conviction-based strategy
pers
Cuy Thierry
• I nvestment universe: European Small and Mid Equities •B enchmark: None (MSCI Europe Small Caps NDR: indicative only) • Minimum recommended investment period: 5 years • Risk Indicator: Target tracking-error ex ante between 4 and 7 (indicative)
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0095827381 LU0095828272 LU0064070138 LU0064070211
Natixis Euro Value Fund Tapping the potential of Eurozone value equities within the scope of a conviction-based strategy
re
Lefèv Olivier
• Investment universe: Eurozone Equities • Benchmark: None (MSCI EMU NDR: indicative only) • Minimum recommended investment period: 5 years
I, A I, D R, A R, D
EUR EUR EUR EUR
LU0389329003 LU0389329185 LU0389329342 LU0389329425
Natixis Impact Europe Equities Fund Active and responsible investing to maximise SRI value added
breton
ine Le Christ
• Investment universe: European equities • Benchmark: None (MSCI Europe: indicative only) • Minimum recommended investment period: 3 years
I, C I, D R, C R, D
EUR EUR EUR EUR
LU0095828512 LU0095828785 LU0066549592 LU0066549832
See the full prospectus which is the only legally binding document.
www.am.natixis.com
October 2009
7
Overwiew of our international Product range Funds of Natixis Asset Management available through Private Placement 25 complementary funds covering all asset classes are available through Private Placement. This quarterly reviewed list of funds aims to provide Natixis Global Associates' teams* with the most innovative products of Natixis Asset Management and to offer a wider range of expertise.
Fixed income
Money Market
Asset class Fund name
Share and ISIN code
Natixis Cash Première
C: FR0010157834
Natixis Cash A1P1
C: FR0010322438
Natixis Impact Cash
C: FR0010008003
Natixis Cash Eonia
I: FR0010298943
Natixis Tréso Euribor 3 Mois
FR0000293714
Natixis Souverains Euro 1-3
I: FR0010208421
Natixis Souverains Euro 3-5
FR0010036400
Natixis Souverains Euro 5-7
FR0010201699
Natixis Souverains Euro 7-10
FR0000449092
Natixis Souverains Euro
RC: FR0000003196
Natixis Inflation Euro
I: FR0007475413
R: FR0010170944
Natixis Crédit Euro
I: FR0010171108
R: FR0010690966
I: FR0010658963
R: FR0010660142
Equities
Natixis Convertibles Euro
BalanAltern. Absolute return ced
R: FR0007084926
Natixis Convertibles Europe
C: FR0010171678
Natixis Actions Europe Dividende
IC: FR0010582478
RC: FR0010573782
Natixis Impact Life Quality
C: FR0010410274
E: FR0010458539
Natixis Actions US Value
I: FR0010256412
R: FR0010236893
Natixis Actions US Growth
I: FR0010256404
R: FR0010236877
Natixis Actions Europe Convictions
C: FR0010346429
Sonic Monde
I: FR0010555797
RC: FR0000993446
Natixis Absolute Quant Bond 18 M
I: FR0010232348
R: FR0010249219
IC: FR0010654921
RC: FR0010657924
IC: LU0161071237
IC: LU0161073951
Natixis Absolute Swap Arbitrage Natixis Constellation European Event Alpha Hedge +
RC: FR0010058453
Réactis Emerging
I: FR0010634345
RC: FR0010626218
These funds are authorized for sale in France and possibly in other country(ies) where their sale is not contrary to local legislation. Please refer to legal information of this material. * Natixis Global Associates is a global distribution platform which brings their investment expertise of the affilliated investment managers to clients outside France.
8 October 2009
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Interview with...
Product Focus Natixis Absolute Swap Arbitrage: one year
Dieudonné Djimi Portfolio manager Why launch this fund last year? The investment teams at Natixis Asset Management anticipated that liquidity would become a major issue for our clients in an already depressed market environment. We therefore decided to launch this new single-strategy absolute performance fund. Its distinctive feature is that it provides our clients’ portfolios with a source of performance that differs from fixed-income, credit and equities while offering a liquid and original strategy. Natixis Absolute Swap Arbitrage is decorrelated from the major classes of risky assets and thus provides genuine diversification. Natixis Absolute Swap Arbitrage (I share) is aimed at investors seeking an annual performance in excess of Eonia +2% over a minimum recommended investment period of two years, with a target annualized volatility of 3% (weekly target VaR(1) of 0.70% with a probability of 95%).
What is the fund's strategy? The investment philosophy of Natixis Absolute Swap Arbitrage flows from the simple observation that fixed-income markets are by their nature inefficient. The multiplicity of parties involved, each with divergent objectives and constraints, gives rise to differing expectations with regard to trends in yield curves. These differences lead to arbitrage possibilities within a single curve or between different yield curves, particularly between the money market (3 months to 2 years) and the bond market (2 to 30 years), two markets that are well arbitraged but highly segmented relative to each other. We have developed innovative expertise in interest rate swaps and particularly the analysis of spot spreads(3) relative to forward spreads(4). This expertise is entirely unique. No competing fund distributed in France currently offers such an approach. We implement duration-neutral and exchange-risk-free arbitrage strategies on 10 yield curves of OECD countries (Eurozone, UK, Sweden, Norway, Switzerland, United States, Canada, Japan, Australia and New Zealand). The arbitrage positions are taken by means of interest rate swaps, which are standard and liquid off-balance-sheet derivative instruments. The fund’s assets, which exceed €50 million, are invested essentially in money-market instruments comprising only negotiable debt securities with A1/P1/F1(5) ratings and maturities of less than three months. The main risks are consequently the risk of capital loss, the risk associated with arbitrage strategies (investment team’s ability to anticipate future relative variations in different international interest rate swap markets) and discretionary management risk. Written on 23/09/2009 (1) Value at Risk: maximum loss over one week with a probability of 95%. (2) Swaps: exchanges of fixed interest rates for variable interest rates. (3) Spread spot: swap rate differentials observed today. (4) Spread forward: future swap rate differentials anticipated by the market. (5) Standard & Poor’s, Moody’s and Fitch ratings.
Natixis Absolute Swap Arbitrage (NASA) began operating just before the bankruptcy of Lehman Brothers (15 September 2008). One year on, it is delivering performances in line with its objectives, in an exceptional historical context. As the markets gradually return to normal, the liquidity of swaps(2) is set to rise further, thereby increasing the arbitrage opportunities for this liquid fund offering absolute and genuinely decorrelated performance.
year of absolute, liquid and genuinely A decorrelated performance Natixis Absolute Swap Arbitrage began operating just before the bankruptcy of Lehman Brothers (15 September 2008). One year on, it is delivering performances in line with its objectives, in an exceptional historical context. As the markets gradually return to normal, the liquidity of swaps(2) is set to rise further, thereby increasing the arbitrage opportunities for this liquid fund offering absolute and genuinely decorrelated performance.
One year on, the objectives have been met With a net performance of 3.96% (compared to 1.64% in the case of Eonia) from its inception up to 31 August 2009, NASA has exceeded its performance objective and shows an annualized weekly volatility of 1.45% and behavior that is genuinely decorrelated from the fixed-income and equity markets: Correlations as of 31/08/2009*
Eonia
Euro MT 1-3 years
CAC 40
Natixis Absolute Swap Arbitrage
-0.07
-0.10
0.00
*calculated on a daily basis since the inception of the fund
The fund currently has a sensitivity of 0.10 and a global off-balance-sheet VaR of 0.22% in a context of a return to risktaking. That represents a good opportunity for investors to enter the market or add to existing investments. Seven new arbitrages have been effected since the end of August 2009, in particular one arbitrage between spot and forward spread of US versus Australian rates and one between spot and forward spread of Norwegian versus Swedish swap rates by means of four- and three-year forwards respectively. Finally, it should be emphasized that NASA has maintained its liquidity over the period and has not been negatively impacted by the bankruptcy of Lehman Brothers, as the Risk Department rightly suspended relations with that counterparty three months earlier.
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What lies behind the success? A discretionary approach based on powerful quantitative tools enabling in particular: n The daily proposal of several thousand possible arbitrages to increase the number of opportunities: transparent strategies a large universe of possibilities
10 SWAPS curves
a large number of potential arbitrages
forward expiries
l Autralia l Canada l Switzerland l Euro zone l Japan l New Zealand l Great Britain
x
All possible spot spread combinations are considered for maturities ranging from 3 months to
x
The process reviews all forward curves from 3 months to 5 years
=
Strategies on a large number of spread combinations
30 years
l Sweden l United States
n Control of the risk in the portfolio in respect of each strategy
For each of the 19 arbitrages currently in the portfolio, two alert thresholds are set: Maximum loss: a “stop loss” order is preset for each transaction. When the level of loss is exceeded, the transaction is closed. That makes it possible to cut any losses. Dynamic profit-taking: a “take profit” order is preset for each transaction. In addition, to further refine our “take profit” system, a “trailing stop” system has been implemented (a stop order which follows the P&L trend and locks in the profit), allowing the gains to run for as long as the P&L trend remains upward. The aim is to capture the bulk of the rise without reducing the hoped-for gain.
Dynamic take profit Gain on the strategy Final profit-taking when the P&L trend runs out of steam and touches the trailing stop
150 Additional gain due to trailing stop 70 Initial profit-taking
Activation of a trailing stop once the initial take profit has passed
Trend over time
10 October 2009
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Source: Natixis Asset Management
News Climate Change: Natixis Asset Management’s Commitment Natixis Asset Management, a recognized pioneer in SRI for 25 years, is developing an asset management expertise that takes into account the climate change factor, and launched a Scientific Committee called Climate Change. To complement in-house resources, Natixis Asset Management is working with this college of experts with varied and complementary profiles: climatologists, economists, geographers, etc. They provide the asset managers with insightful information on the stakes related to climate changes and enlighten the Natixis Asset Management teams on issues related to the management of natural resources, the reduction of greenhouse gas emissions and the adaptation to climate change. This Committee is chaired by Carlos Joly, an acknowledged figure in the world of responsible and sustainable investment*. “Given our commitment to responsible and sustainable investing, Natixis Asset Management has been working for several months to integrate climate change factors into an investment strategy. This requires an in-depth understanding of the geographic, sectoral, technological and human impacts associated with global warming. However, we are conscious of not being specialists in this vast, complex and constantly evolving field,” Pascal Voisin, CEO of Natixis Asset Management. The launch of this new expertise Climate Change was announced at a Natixis Asset Management workshop on October 14 before some 200 clients. The theme was: “Climate changes and investments: is it too soon to feel concerned?” On this occasion, Carlos Joly*, Chairman of the new committee, spoke about the Copenhagen Climate Change Summit. The theme of climate change was relayed the next day at a press workshop attended by 23 journalists from the financial, economic press and the press specialized in sustainable development.
14 Natixis Asset Management funds earn Novethic’s SRI Label The Novethic SRI Label has been awarded to fourteen SRI funds managed by Natixis Asset Management and targeted at its direct clients and, more specifically, at clients of the Caisses d’Epargne and Banques Populaires networks. The Novethic SRI Label aims to encourage the information transparency about SRI funds and to provide a simple kitemarket for individual savers. These Novethic SRI Labels replace Novethic’s former rating system which ran from “aaa” for the best funds to “b” for the less good. The Novethic SRI Label is awarded on an application basis to funds which fully integrate environmental, social and governance (ESG) issues and provide comprehensive information on their extra-financial characteristics and portfolios holdings. The labels are awarded for one year and reviewed every six months. These 14 Novethic SRI Labels testify on the Natixis Asset Management commitment in this SRI field. Further information: www.am.natixis.com and www.novethic.com
Natixis Asset Management and the “green growth” Natixis Asset Management was one of the partners of an event dedicated to the following theme: “Financing green growth”. The event brought together nearly 200 delegates on September 22. It was organized by the French Ministry for Ecology and Paris Europlace in order to extend the commitments made under the Grenelle Environnement process and to identify what action financial institutions in the Paris stock market were taking to promote sustainable development and how to encourage the spread of best practice. The meeting has been introduced by Chantal Jouanno, Secretary of State for Ecology and by the former Prime Minister, Michel Rocard. Philippe Zaouati, Head of Development at Natixis Asset Management, took part in a round table on “The impact of climate change for corporate finance” hosted by Anne-Catherine Husson Traoré, CEO of Novethic.
*Carlos Joly is an SRI specialist known worldwide for having co chaired the working group that drafted the Principles for Responsible Investment (PRI).
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The Wave - RenĂŠ van Zuuk Architekten B.V. Photography: Luc Boegly/Artedia.
solid or flexible?
Balancing perspectives to create value At Natixis Asset Management, we understand that being a strong asset manager makes us more responsive. We continually strive to meet our clients’ needs. With around e294 billion in assets under management as of June 30, 2009 and some 600 employees based in Paris, Natixis Asset Management offers institutional investors, large companies, distributors and banking networks a wide range of products and investment solutions across all asset classes. European expert of Natixis Global Asset Management www.am.natixis.com
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