Investment approach

The Edmond de Rothschild fund investment approach

Edmond de Rothschild fund's approach is essentially bottom-up, that is, we select securities rather than markets.

By being extremely selective in our screening of companies, we are confident that our choice will outperform the indices in the long run. The portfolio managers focus on the fundamentals of each individual company and carry out full analysis, including meeting the company management, before making a decision to invest.

For all asset classes, our investment philosophy gives the manager latitude for decision-making. This includes strong emphasis on performance and risk control, in relation to the client’s goals.

Adding or cutting a position in the portfolio is a long-term investment choice, and the quality of the issuing company is paramount, whether for equities, convertible or corporate bonds.

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The securities that make up the portfolios are selected in limited number for the inherent quality and their medium- and long-term growth potential, using research that makes use of databases, fundamental analysis, qualitative analysis and frequent company visits.

While there are subtle differences in how each Edmond de Rothschild subfund is managed according to its specific investment universe, we use the same global investment process. Using quantitative analysis methods, we reduce the number of companies within the fund's universe to those that meet certain key criteria.

We then implement the qualitative phase of our analysis. This includes analysis of each company's financial documents, as well as on-site visits with management.

Only when we have completed all of these steps and when each company's management and financial statements have been thoroughly screened do we make a decision.

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A specificity of Edmond de Rothschild Asset Management, convertible bonds are managed by an equity team according to a bottom-up, stock picking approach, characteristic of the in-house investment philosophy. The managers focus on stock-specific factors concerning the underlying company rather than on measures of duration and volatility spreads, more representative of a bond approach.

In selecting convertible bonds, they benefit from the expertise and input of the entire European equity team, and are therefore in a position to consider a variety of large, small caps, and sector-specific companies which have been fully researched for equity portfolios.

Convertibles are selected for the portfolio according to the premium to strike, the valuation of the stock at the time of issue, the delta and yield to maturity and importantly, the fundamentals of the underlying company. Managers look for good profit growth, ROE, low debt, high free cash flow and attractive valuations. On the qualitative side, company visits and analysis from brokers enable them to select companies with experienced and reliable management, and a strong positioning on their sectors.

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We manage our corporate bonds using a similar approach to our equity stock picking, which we refer to as ‘bond picking’. Through the fundamental credit analysis of corporate issuers, we seek bonds which offer a higher return potential than no-risk sovereign issues.

We believe that obtaining significant added value on this market depends upon the manager’s ability to evaluate the quality and pricing of the issues, and to react quickly to any opportunities.

Our investment process focuses on:

Credit risk analysis: by regularly monitoring the quality of corporate issues, our managers/analysts seek to optimise the risk/yield ratio by selecting the issues with the best yield within in each rating category.
Macro-economic analysis: our in-house economist provides regular economic updates and forecasts, enabling the managers to anticipate/manage variations in the interest rate yield curve.
An opportunistic policy: our managers react quickly to benefit from inefficient markets which over-value or under-value issues over a short, limited period.

The Edmond de Rothschild Fund currently offers 6 subfunds

Euro Corporate Bonds Short Term
A short term corporate bond fund aiming to beat the money market index and to offer returns over periods between 6 to 12 months. The fund invests in bond issues denominated in euros offering superior yields to government securities : high quality corporate bonds with S&P ratings ranging between BBB and AAA (or equivalent). Any currency risk is systematically hedged.
Euro Corporate Bonds Mid Term
A mid term corporate bond fund aiming to beat the the MSCI ECCI 3-5 YEARS index over a 3 to 5 year period. The fund invests in issues denominated in Euros offering superior yields to government bonds : high quality corporate bonds with S&P ratings ranging between BBB and AAA (or equivalent). Any currency risk is systematically hedged.
Euro Government Bonds Mid Term
A mid term government bond fund aiming to outperform the MSCI EDI Sovereign 3-5 year index over a 3 to 5-year investment period. The portfolio contains all forms of Euro bonds issued or guaranteed by an OECD member State.
Euro Government Bonds Long Term
A long term government bond fund aiming to outperform the EDI Sovereign 7-10 index over an investment period greater than 5 years. The portfolio contains all forms of Euro bonds issued or guaranteed by an OECD member State.
European Convertible Bonds
A defensive portfolio of European convertible bonds, aiming to outperform the Exane ECI index over the mid term. An actively managed portfolio focusing primarily on the fundamentals of the underlying issuer.
Europe Value
A pan-European fund managed with a Value approach. Securities are selected on the basis of undervaluation with regards to their market or sector, or must offer higher yields than the MSCI EUROPE index companies. The aim is to beat the index over the medium term and with lower volatility through careful stock picking.

Warning

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Edmond de Rothschild Fund is registered on the official list of Undertakings for Collective Investment in accordance with the Luxembourg law of 20 December 2002 on Undertakings for Collective Investment (hereinafter the "Law of 2002") and is governed by Part I of the Law of 2002 and qualifies as a self-managed investment company with variable capital in accordance with article 27 of the Law of 2002 (the “Fund”).

The Fund is currently registered in :

• Luxembourg

• Germany

• Italy

• Spain and

• Switzerland.

The Fund is in the process of being registered in other countries and when registration will have been completed, this website will be updated with the relevant information. The Fund is intended exclusively for sale to persons resident in the countries in which it is registered. It may not be sold or marketed in any jurisdiction other than that of the countries in which it is registered. The Fund may not be offered to any persons if proscribed by the applicable laws of their country of origin or any other country with respect to those persons or the Fund.

The official language of the Fund is English; however, this does not imply that the Fund is or will be registered in countries in which English is an official language.

Residents of the United States of America: the shares of the Fund have not been and will not be registered under the United States Securities Act of 1933, as amended or the securities laws of any of the states of the United States of America, nor is such registration contemplated. The shares of the Fund may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “US Person”.

Residents of the United Kingdom: the Fund is not a recognised collective investment scheme for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom. The promotion of the Fund in the United Kingdom is accordingly restricted by law.

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All data and information featured on this website (i) are not intended for consultation in those jurisdictions where the Fund is not registered or is otherwise unauthorised and (ii) are provided by the Board of Directors of the Fund for purely informative purposes. The information does not represent a solicitation, an offer, or a recommendation to buy or sell an investment or to take part in any other transaction. It cannot be considered as an investment advice from the Board of Directors of the Fund or any other affiliated companies and has no legal or contractual value.

The data, comments and analyses in this presentation reflect the opinion of the Board of Directors of the Fund with respect to the markets and their trends, regulation and tax issues, on the basis of its own expertise, economic analyses and information currently in its possession. However, they shall not under any circumstances be construed as comprising any sort of undertaking or guarantee whatsoever on the part of the Fund. All the calculations indicated in this website arise from accounting data for the Fund, and from financial information suppliers (Thomson Financial and Bloomberg) for the indices and the characteristics of the stocks held in the portfolio. No responsibility or liability is accepted regarding the accuracy, reliability or legality of any information whatsoever accessed through this website.

Any particular tax treatment associated with the Fund may depend on the individual situation of the potential investor or investor and may be changed in the future. When the figures given in this website are in a currency other than that of the country in which the potential investor or investor is resident, the gains or losses accruing to the investor may be further increased or reduced by fluctuations in foreign exchange rates.

Potential subscribers are advised to seek professional advice on the laws and regulations (such as those on taxation and exchange control) applicable to the subscription, purchase, holding, redemption and sale of shares in their countries of citizenship, residence or domicile.

Past performance is not a guarantee of future returns. The value of investments may fall as well as rise. There is no guarantee on or protection of any amounts invested. All performance figures on this website may be affected by exchange rate fluctuations.

Investments made by the Fund include special considerations and risks such as: capital loss risk, discretionary management risk, equity risk, risk associated with investment in certain funds, currency risk associated with shares denominated in currencies other than those of the Fund, foreign exchange risk, and fixed income and credit risk. The description and details of these risks are stated in the Fund's full prospectus available on this website. It is the responsibility of each investor, and it is highly recommended, (i) to obtain the different regulatory specification sheets for each financial product prior to any investment, in order to analyse his or her risk and to forge his or her own opinion and (ii) to obtain the opinion of specialist advisers on these questions in order in particular to ensure the appropriateness of the investment having regard to his or her financial and legal situation.

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