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Fitch Requires Rating Actions on six Petercam Funds

(The following statement was released by the rating agency) PARIS/LONDON, December 14 (Fitch) Fitch Ratings has affirmed the “Robust” Fund Quality ratings of 5 funds managed by Petercam Institutional Asset Management (Petercam IAM) and placed yet another under evaluation. The list of rating actions is as follows: Petercam Equities Euroland (PEE1): affirmed at “Robust” Petercam Equities Europe (PEE2) affirmed at “Robust” Petercam Equities Europe Sustainable (PEES) affirmed at “Powerful” Petercam Securities True Estate Europe (PSRE) affirmed at “Strong” Petercam Equities World Sustainable (PEWS) “Sturdy” rating placed Below Review Petercam L Bonds Government Sustainable (PBGS) affirmed at “Robust” Fitch has placed the “Powerful” rating of PEWS “Under Overview” following the departure of Bart Baetens, the lead Portfolio Manager (PM) of the fund considering that 2008. A. Roose, who was a member of the worldwide equity group, will take more than as lead PM, with D.Dury, PM at Degroof, joining as co-manager. Fitch views Mr. Baetens as a important element of the fund’s investment method. The agency expects to resolve the “Under Review” status of the fund in the next six months. Fitch will closely monitor the fund throughout this period to decide if the capacity of the fund to accomplish its objectives and outperform peers is structurally modified. The ‘Strong’ rating reflects the funds’ active, extended-term investment approach, which is primarily primarily based on bottom-up fundamentals choice, and also incorporates leading-down thematic views and the SRI-ESG criteria for the relevant funds. All round, the funds advantage from strong, broadly steady, staffing and IT sources. The merger among DeGroof Fund Management and Petercam IAM creates some uncertainties, but need to have no rating impact, as the limited overlaps in between the two companies’ item variety and methods are anticipated to leave the present investment teams and processes of the funds unaffected. Essential RATING DRIVERS Fund Presentation PEE1, PEE2, PEES, PSRE and PEWS are UCITS IV-compliant Belgium SICAV. PBGS is UCITS IV-compliant Luxemburg SICAV. PEE1, PEE2, PEES, PSRE invest in European equity. Particularly, PEES invests according to their socially accountable investment (SRI) or environmental, social and governance (ESG) criteria. PSRE invests in European real estate equities. PBGS and PEWS also comply with a sustainable strategy, investing in sovereign bonds from OECD countries and international equities (with an emerging market place bias), respectively. Investment Procedure Petercam European equity funds (PEE1, PEE2, PEES, and PSRE) stick to an active, long-term investment approach, mainly based on bottom-up fundamental stock-picking and which also incorporates leading-down thematic views. The funds are fully invested, and have a quality growth, mid-cap bias. In Fitch’s view, the 4 European equity fund’s investment edge originates from its focus on beneath-researched, quality modest to mid-cap businesses. Portfolio building is not constrained by the funds’ benchmarks, even though risk recommendations limit deviation from the benchmark. PEES’s eligible universe of about 250 stocks is derived from a filtering process making use of third-party and proprietary SRI-ESG scoring elements, which the fund sees as determinants of sustainable growth. PSRE is managed against a customised benchmark, the Petercam European Property Shares (PEPS) index. PEWS invests in 50 equally weighted big-cap global businesses that it views as possible market place leaders and comply with Petercam’s sustainability criteria. Geographical allocation is based on the Oxford Economics’ 2025 GDP forecasts and focuses on companies’ sales location rather than on their domicile. The fund has an EM, top quality development bias and is exposed to the monetary sector. PGSB’s investment method is based on a quantitative evaluation employing over 50 criteria that rank OECD nations by sustainability metrics. The leading 50% of nations by ranking are eligible for investment. The PMs aim to weight their allocation towards countries with the highest SRI rankings. The fund is completely invested, with a bias towards ‘AAA’/’AA’ rated eurozone government bonds. Sources Investment decisions are taken collectively by the two (or 3) PMs of the funds. A dedicated equity analyst team of nine, specialised by sector, conduct equity research on European stocks. For real estate stocks, global equity stocks and sovereign, PMs conduct their own analysis. An independent investment threat group of four oversees and challenges the PMs’ decisions, producing full use of third-celebration danger analytics. Funds managed below a sustainable method advantage from the assistance of an advisory board and a dedicated SRI coordinator. Petercam IAM has outsourced its middle office and IT functions to Lombard Odier given that 2012. Track Record PEE1 has performed strongly in 2015, attaining a best quintile functionality, outperforming each peers and the index. PPE2 has also outperformed, generating a second quintile efficiency. Even so, both funds performed poorly in 2014 due to their underweight positions to massive capitalisation stocks and utilities, combined with poor stock-picking. More than a five year period, PEE1 has achieved a leading quintile overall performance. PEES’s overall performance has lagged the index and (broad) peers more than one, 3 and 5 years to November 2015. As a consequence its Lipper Leader scores for constant return (for Belgium) were 1 more than a three-, five- and 10 year-period to November 2015. Nevertheless, its six-month rolling Jensen’s alpha (a measure of risk-adjusted functionality) has been improving because August 2014, returning to positive territory in 4Q15 for the first time because Could 2013. PSRE has delivered first quintile overall performance over 3 and five years to November 2015, outperforming its benchmark net of costs with decrease volatility, thereby meeting its objective. It is probably to underperform peers in markets where UK actual estate performs strongly, provided the benchmark’s and fund’s reduced weighting to the UK compared with peers. PEWS, which has been managed with the existing strategy given that 2008, has been an typical performer in its worldwide equity category. EM and the exclusion of the monetary sector explain most of its performance deviation from the indicative benchmark, MSCI World. PBGS has been an average performer in its category, underperforming given that 2012 the JP Morgan EMU Government Index, which is utilized for reference only, provided the fund’s restricted SRI universe. The fund’s efficiency is explained by its bias towards very rated, prices-sensitive rather than credit-sensitive eurozone government bonds. Fund Manager Petercam IAM is a wholly owned subsidiary of Bank Degroof Petercam. The merger of Bank Degroof and Petercam completed in October 2015 will be followed by the merger of the two asset management subsidiaries in early 2016. In Fitch’s opinion, the merger amongst Degroof and Petercam should leave core investment processes and front-office employees largely unaffected but could lead to alterations in support and manage functions, operating model and technological platform. Petercam IAM and Degroof had EUR30bn assets below management (AUM) at as at finish-September 2015. The company’s historical concentrate has been in European assets and investors. RATING SENSITIVITIES The rating might be sensitive to material modifications in the investment or operational processes or sources dedicated to the fund. A material adverse deviation from Fitch’s guidelines for any key rating driver could outcome in a downgrade. For example, notable structural deterioration in the fund’s performance or departure of PMs (to which PSRE and PEWS are deemed far more sensitive) or a substantial operational loss due a merger-connected procedure failure, might lead to a downgrade. The PSRE fund could be upgraded to ‘Excellent’ if it meets Fitch’s criteria for a ‘Strong’ track record and if PMs demonstrate stock choosing skills in markets that historically have not been core to Petercam’s knowledge. PEEI might be upgraded if the fund can demonstrate that 2014 was an isolated occasion in an otherwise robust lengthy-term track-record. This would be demonstrated through constant outperformance on a threat-adjusted basis more than five years and much more. Further, continued weak performance of PEES would most likely result in the fund becoming placed ‘Under Review’ or downgraded. Fitch sees little prospective for an upgrade of the other funds, provided the particular nature of these funds and due to the funds’ already high ratings. Contacts: Main Analysts Manuel Arrive, CFA (PSRE, PEWS, PBGS) Senior Director +33 1 44 29 91 77 Fitch France S.A.S. 60 rue de Monceau Paris 75008 Alastair Sewell, CFA (PEES, PEE1, PEE2) Senior Director +44 203 530 1147 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analysts Manuel Arrive, CFA (PEES, PEE1, PEE2) Senior Director +33 1 44 29 91 77 Alastair Sewell, CFA (PSRE, PEWS, PBGS) Senior Director +44 203 530 1147 Committee Chairman Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Media Relations: Rose Millburn, London, Tel: +44 203 530 1741, E-mail: rose.millburn@fitchratings.com. Further info is accessible on www.fitchratings.com Applicable Criteria Fund Top quality Rating Criteria (pub. 16 Sep 2014) here Further Disclosures Solicitation Status here Endorsement Policy right here ail=31 ALL FITCH CREDIT RATINGS ARE Subject TO Specific LIMITATIONS AND DISCLAIMERS. PLEASE Study THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS Hyperlink: right here. 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