ADVERTORIAL AMUNDI ASSET MANAGEMENT
Opportunities in volatility
Gilbert Keskin, co-head of volatility, arbitrage and convertible bonds at Amundi is
confident there are opportunities to profit from equity market volatility
Amundi commenced operations
on 1 January 2010 and
comprises the former asset
management businesses of
Crédit Agricole S.A. and Société
Générale S.A. With over €650bn
in assets under management
(proforma data as at 30 Sep
’09), Amundi is one of the
world market leaders in asset
management.
www.amundi.com
“
Our approach to
volatility is one of
active management,
around a mean
reverting strategy:
take advantage of a
low volatility regime
to be long volatility,
but also benefit
from a high volatility
environment by
selling volatility
”
Gilbert Keskin, co-head
of volatility, arbitrage and
convertible bonds, Amundi
Asset Management
Fluctuations in the volatility
of equity markets represent
an original source of
performance.
Traditionally considered
as a risk indicator, volatility
combines all the characteristics
of an asset class in its
own right, exhibiting:
■ Accessibility – it is possible
to invest in equity
volatility via options.
The price of the different
options available varies
according to implied
volatility, which reflects
the future risk expected
by investors.
■ Low-correlated behaviour
compared with
trends in returns of the
equity asset class and
credit spreads – as a
rule, a rise in equity
volatility is related to
a correction in equity
markets or a widening
of credit spreads.
■ Performance – introducing
this asset class to an
equity or balanced portfolio
can help reduce its
overall risk while increasing
its expected return.
l Current trend
The current macro-economic
environment
remains uncertain, and
although volatility started
to normalise in 2009 from
the exceptional levels seen
in October/November
2008, investors remain
divided between a possible
recovery and a prolonged
recession.
The fact that the markets
are divided between
such scenarios means volatility
will keep fluctuating;
rising when investors
NAV & 1yr gbl basket of implied volatilities
Fund 100 basis
140
130
120
110
100
1yr Global Basket
Implied Volatility
90
Nov ’07 Apr ’08 Sep Feb ’09
Source: Amundi, Bloomberg, Deutsche Bank
become more risk averse,
or falling when they regain
confidence.
Since our approach is
dynamic, we believe that
the environment is favourable
for our strategy, which
aims to profit from volatility
moving back to its longterm
average, (known as
‘mean reversion’) as well as
its short-term fluctuations.
Our approach to volatility
is one of active management,
around a mean
reverting strategy: take
advantage of a low volatility
regime to be long volatility,
but also benefit from
a high volatility environment
by selling volatility.
As such, our strategy
is truly an absolute return
one, which aims – within
a risk-controlled and
budgeted framework – to
deliver returns of 7% p.a.
before fees over the minimum
investment horizon
of three years, with low
correlation to equity and
credit markets.
In its global fund,
Amundi seeks to provide
this performance through
pure exposure to equity
market volatility by taking
advantage of medium-term
cyclical trends, short-term
fluctuations in volatility
and relative value between
North American, eurozone
and Asian one-year implied
volatility markets.
The management team is
free to allocate the weight
of the different zones, with
a target of 50% S&P 500,
30% DJ EuroStoxx 50 and
20% Nikkei (approximately
the weights of MSCI
World). The fund has a
three-year investment horizon
and is managed within
a risk controlled and budgeted
framework.
l A stable team
The volatility team is comprised
of eight fund managers
with £3.7bn under management
as of December
2009. The two co-heads of
the team, Gilbert Keskin
and Eric Hermitte, have
been working together
since 2000.
Events over the past
18 months have shown
the benefit of the active
management of volatil-
28 PORTFOLIO ADVISER [www.portfolio-adviser.com] JANUARY 2010
NAV - I
Jul
50
40
30
20
10
0
Dec
1yr implied volatility (%)
ity using a mean reverting
approach.
While we have built
upon the success of our
European volatility funds
since 2005, the extension
to a global universe in 2007
has also shown the benefits
of having a dynamic
approach to volatility
across several regions.
We believe that both
funds have demonstrated
their ability to perform
through turbulent markets,
and still have great potential
as long as volatility
remains volatile!
l Access via Ucits III
Investors can access
Amundi’s volatility management
expertise via its
Luxembourg Sicav, CAAM
Funds (to be renamed
Amundi Funds), a UCITS III,
FSA–recognised collective
investment scheme under
s.264 of the UK Financial
Services and Markets Act.
The NAV shown in the
graph above is for CAAM
Funds Volatility World
Equities ($) Institutional
Accumulation shares, net
of fees in $ to 31 Dec
’09. A euro-denominated
sub-fund investing in the
one-year implied volatility
of the Eurostoxx 50 is
also available, as is a sterling-hedged
share class for
both world and euro funds
for which the management
company intends to seek
UK reporting status. Past
performance is not necessarily
a guide to or guarantee
of future returns.
For further details contact:
E: ian.milton@amundi.com
T: 020 7074 9330
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