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CAAM launches a new sector neutral European fund

EUROPE – Crédit Agricole Asset Management is launching a new research sub-fund for institutions under its CA-Funds umbrella fund range in June. The new fund, Europe Equity Research, will be based on the recommendations of the 17 strong in-house research team, who specialise in 12 main sectors covering 88% of MSCI’s European index, and are located both in London and France.

“ We originally started as a shadow portfolio, partly to measure and also to motivate the analysts. Then we thought this was good and we put in a little seed money in October 99 and so it ran as only an internal portfolio,” says Christopher Johnson, head of UK marketing at Crédit Agricole Asset Management.
“ We realised that it was actually out-performing the market last year, so we thought let’s reconstitute this as a proper external fund, and obviously we had to do a little jigging with it: add sectors which we didn’t cover, like energy on a passive basis.”

The fund is run on a sector neutral basis and fared well during last year’s stock market shake-up. Johnson says: “ It’s always been done on a sector neutral basis, literally just taking the top stock picks and pushing them in on a sector neutral basis. Back testing, what it would have been on the basis we’re doing it, showed that it would’ve out-performed during the year 2000 by 2.2%.
“ Given that it has a tracking error of 2.2 its information ratio is 1. It has to be said that the target will be 0.5 and the tracking error would normally be between 2-4, but it’s interesting, we had a good performance with a relatively low tracking error,” he adds.

The fund will normally hold 125 stocks and initially it will only be sold to institutions for e500,000 a share, but the manager says it is likely that a retail share class will be launched during the third or fourth quarter if this year.

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