Management Objectives
Convictions Asset Management is a management company, which invests in all asset classes using a Global Macro/Top Down approach. Fundamental analysis and technical tools are used to identify the best investment opportunities in equity, credit, commodities and foreign exchange markets.
The management process is based on:
- A Global Macro/Top Down approach that takes into account economic scenarios and the analysis of the monetary policy of the central banks
- Innovative risk management through risk budgets allocation and active hedging of extrem risks (CARE ™, Couverture Active des Risques Extrêmes)
- A great freedom in the selection of asset classes
Fund range:
- Convictions Premium : Top/down global macro investment style with an objective of an average annual performance of 7% over more than three years, and a maximum annualized volatility of 7%.
- Convictions ActivInflation : wealth management approach that takes into account the appreciation of real assets and seeks to outperform the annual Eurozone inflation rate by 3%, while maintaining a maximum annualized volatility target of 7%.
- Convictions Europactive : flexible fund management aiming to outperform the Dow Jones Stoxx 600 index.
The allocation of funds is the result of independent analysis and qualitative forecasting. The management committee meets regularly to identify major economic trends based on published economic data and information from the central banks. We compare the opinions of our team with with those expressed by our economic advisers.
The identification of economic scenarios is based on:
- The analysis of key macroeconomic trends
- The monetary and fiscal policies of the central banks
- The geopolitical changes
The portfolio is built based on a technical analysis that enables the manager to:
- Test the direction and quality of market movements
- Estimate the probability of a trend reversal
- Determine the entry and exit points
The discretionary method is based on:
- The selection of markets for each scenario
- The responsiveness of trading
- The framework of a rigourous risk management process
Innovative Risk Management: CARE / Stop Loss
The management process takes into account the level of risk on a continuous basis, but also in extreme market conditions.
The allocation is subject to a specified risk budget:
Managing and measuring risk is part of our investment process. For each strategy, we calculate the risk budgets to assess ex-ante volatility (short- and long-term) and risk.
Single positions management:
For each holding in the portfolio the risk manager defines different flags & Stop Loss levels based on its volatility. These are set based on calculations of standard deviation (ATR: Average True Range). When the first Stop Loss limit is reached, the manager will cut between 25% and 50% of the position, depending on the asset class.
CARE - Managing extreme risks:
The objective of measuring and managing extreme risks is to protect portfolios against the consequences of unpredictable crises.
On one hand, major crisis cannot be anticipated...
It is very difficult to predict sudden and major crises due to geopolitical and economic events, such as the attacks of September 11, 2001, the subprime crisis, accounting changes that have highlighted the deficiencies for some companies (such as Enron) and the sudden liquidity shortages that endanger the funds (e.g., LTCM).
On the other hand, a crisis and its consequences will be even longer and deeper if the market drop is important.
The main result of these sudden crises is an increase in correlation and volatility.
The solution devised by Convictions AM is CARE™ (Couverture Active des Risques Extrêmes), a strategy for hedging extreme risks.
It involves implementing a strategy for systematic portfolio risk hedging through the management of a basket of options. The options portfolio is actively managed in several forms depending on the cost and volatility of assets, either through put options that are very out of money (below the strike price) or by using a delta neutral approach.
Illustration and relevance of our protection strategy CARE™:
