CAAM to seize on steady shift back to equities

Crédit Agricole Asset Management, the ?400bn French fund house, predicts a huge renewed appetite for equities as an asset class during 2006. “But investors will be making a careful, conscious decision,” believes Christine Lacoste, the French group’s head of marketing

co-ordination.

“They are still feeling the trauma of the crisis of the beginning of the century”, she says. The consequence of this state of mind is a keen interest in absolute return concepts, for which Ms Lacoste sees “great expectations” this year. As a result, CAAM plans to “enlarge and enrich” the ?23bn absolute return segment of its Luxembourg umbrella range, particularly targeting private banks. This offering began with CAAM’s VaR (value at risk) funds. The group believes the methodology of controlling risk, and

therefore of limiting investor losses, is more

sophisticated and precise than rival mechanisms such as tracking error.

CAAM expects equity market volatility, currently very low, to increase in coming months and sees a “genuine opportunity” for implementing mean reverting strategies, which typically involve purchasing an underperforming stock or security and holding the position until the market rebounds. Also on the agenda are arbitrage strategies between volatilities of different securities, and directional products taking advantage of the movement of an underlying asset class.

An absolute return currency arbitrage product has already been successful with banks in 2005, having raised more than ?1bn. At the end of 2005, CAAM launched a French-domiciled open-ended fund, based on absolute return concepts, combining quantitative, fundamental and technical signals. If performance is successful, this could be added to the Luxembourg range.

To satisfy investors’ renewed appetite for equities, CAAM will focus on emerging markets, particularly Asia, with a new Indian fund in the pipeline. “It is not too late to participate if you have long investment horizons; in fact it is just the opposite,” says Ms Lacoste. “Today, emerging markets represent 60 per cent of the world population, but only 20 per cent of the GDP. We know this is going to increase sharply in the twenty coming years.”

A new Japanese equity fund will be managed by Resona, one of Japan’s largest banks.

ET

Lacoste: high hopes for absolute return strategies