Eurizon Fund -
Limited Tracking Error - LTE
The main goal of the limited tracking error investment style is to replicate the trend of the benchmark (beta), without renouncing the possibility of maximising excess returns, in respect of the defined risk budget limits.
Investments are managed using sophisticated qualitative and quantitative models developed internally, that provide a representation of the economic cycle and valuation profiles.
The role of the models is to replicate the market addressed and identify sources of excess return.
Sophisticated analysis and risk allocation tools are used to limit volatility and maintain strict adherence between the performance of the fund and its benchmark.
LTE range investment philosophy
The Limited Tracking Error (LTE) range is managed using a combination of quantitative models and qualitative analysis: equities and bonds are assigned a maximum level of Tracking Error Volatility, and the fund manager’s main objective is to outperform the benchmark and deliver excess return within the TEV limit. The portfolios are optimised by minimising transaction costs*.
The fund manager makes extensive use of a wide set of statistical models that replicate the behaviour of a number of macroeconomic variables, as well as of market valuation profiles and sector trend analyses. This investment style combines quantitative models with a discretionary decision-making process, always within the pre-defined TEV limits.
Environmental, Social, and Governance (ESG) factors are an integral part of Eurizon’s investment process for the selection of financial instruments. All equity funds, and some bond funds**, of the LTE range are classified ex art. 8 SFDR.
ESG Information
This fund promotes environmental and social characteristics as per Article 8 of the Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR”). The Fund does not have sustainable investment as its objective.
Risks Factors of the LTE fund range
For LTE Bond Funds
Risks typically associated with ordinary market conditions:
• Benchmark orientation
• Concentration
• Credit
• Derivatives
• Hedging
• Interest rate
• Investment fund
• Management
• Market
• Sustainable investing
Risks typically associated with unusual market conditions or other unpredictable events:
• Counterparty and collateral; + securities financing
• Default
• Liquidity
• Operational
• Standard practices
For LTE Equity Funds
Risks typically associated with ordinary market conditions:
• Benchmark orientation
• Concentration
• Convertible bonds
• Currency
• Derivatives
• Equity
• Hedging
• Investment fund
• Management
• Market
• Sustainable investing
Risks typically associated with unusual market conditions or other unpredictable events:
• Counterparty and collateral; + securities financing
• Liquidity
• Operational
• Standard practices
The above risk factors are not exhaustive. Please refer to the prospectus and particularly the risk section of each fund.
A management team specialised in LTE products
Key features:
- 30 billion euros in AUM***
- A Team that has worked together for many years
- 18 Fund Managers with an average experience of 15 years
- Managing 37 portfolios
Investment Team subject to change without notice. Why not an ETF?
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Collateral risk
- Counterparty risk (physical and synthetic): swaps for synthetic ETFs and securities lending for physical ETFs (in some cases up to 90%) expose the investment to counterparty risk, which is underestimated by investors.
- Asset and collateral liquidity risk (physical and synthetic): between swap collateral and securities lending, there is often certified equity on individual securities whose low liquidity makes pricing less transparent.
- Risk of transparency (physical and synthetic): it is difficult at times for investors to determine risk due to lack of information, or incomplete information, on collateral, swaps, and securities lending.
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Market Risk
- Bid/Ask spread risk (physical and synthetic): trading, bid/ask spread and closing prices not in line with linked indices expose investors to an undefined bid/ask spread.
- Risk of underexposure (physical and synthetic): most physical and synthetic ETF replication models do not reinvest dividends, resulting in continued underexposure to the benchmark.
- Risk of low benchmark replication in the event of rebalancing (physical): Intensive use of securities lending makes the physical ETF less flexible and less responsive to periodic benchmark rebalancing.
Useful insights
Notes:
* There can be no assurance that the investment objective will be achieved or that there will be a return on capital. The LTE funds do not benefit from any guarantee to protect the capital. Past performance does not predict future performance.
** Bond EUR Short Term LTE, Bond EUR Medium Term LTE, Bond EUR Long Term LTE, Bond EUR 1-10 y LTE, and Bond EUR All Maturities LTE.
*** Data as of: 31/01/2023
This marketing communication is exclusively intended for professional investors as defined in the European Directive on markets in financial instruments (MiFID) in the countries where the Sub-Fund(s) is/are registered/authorised for distribution. This marketing communication is not intended for retail investors as per MiFID and is not intended for US Person. Before taking any investment decision, you must read the Prospectus, the Key Information Document (the “KID”), as well as the Management Regulations and the last available annual or semi-annual financial report. These documents are available in English (and the KIDs in an official language of your country of residence) and may be obtained at any time, free of charge on the Management Company’s website www.eurizoncapital.com. To find out whether the Sub-Fund is registered/authorised in your country, please refer to the www.eurizoncapital.com. This document relates to Eurizon Fund (The “Fund”), a Luxembourg UCITS in accordance with Directive 2009/65/CE and pursuant to the Part I of the Law of 17 December 2010 (the “Law of 2010”) on undertaking for collective investment and “Fonds Commun de Placement” (FCP). This document is issued by Eurizon Capital S.A. organized as a public limited company in accordance with the Law of 1915, registered in the Luxembourg Trade and Companies Register under number B.28536 at 28, boulevard Kockelscheuer, L-1821 Luxembourg and authorised as management company of the Fund under the Luxembourg Law of 17 December 2010 on undertaking for collective investment The content of this document, including any opinions, does not constitute any legal, tax or investment advice. Past performance does not predict future returns. There is no guarantee that the positive forecasts mentioned in this document will be reached in the future. Please liaise with your tax and financial advisor to find out whether a product is suitable to your personal situation and understand the related risks and tax impacts. The tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Should the Sub-Fund be registered/authorised in your country, the entity in charge of processing subscription, repurchase and redemption orders and other payments to unit-holders relating to the units of the UCITS (“Order & Paying facilities”), as well the entity in charge of handling information and Fund documents (“Information facilities”).
For more information about the ESG criteria, approach, binding elements of the selection process, methodological limits, please refer to the Prospectus, the SFDR Pre-contractual disclosure, as well as the Summary of the website Product disclosure, available in English and in an official language of the EU country of registration of the UCITS in the section “Sustainability-related Disclosure” of the website at: www.eurizoncapital.com.
Switzerland: When the Sub-Fund is not registered with the Swiss Financial Market Supervisory Authority (FINMA), this marketing communication is exclusively intended for Swiss Professional investors/Institutional investors as per Article 4(3) and 4(4) of Federal Act on Financial Services (FinSA).When the Sub-Fund is registered with the Swiss Financial Market Supervisory Authority (FINMA), this marketing communication is intended for Swiss Retail investors as per Article 4(2) of the Federal Act on Financial Services (FinSA) or for Swiss Professional investors/Institutional investors as per Article 4(3) and 4(4) of FinSA. Swiss Fund documents available at the Swiss representative agent: 62, rue du Rhône, 1204 Geneva, Switzerland.