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 potential 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.
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.
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.
Funds in Focus
A management team specialised in LTE products
Key features:
- 34 billion euros in AUM***
- A Team that has worked together for many years
- 18 Fund Managers with an average experience of 15 years
- Managing 45 portfolios
Investment Team subject to change without notice. Why not an ETF?
-
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.
-
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:
* Some LTE bond funds promote E or S criteria as per Article 8 per Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR”). Some LTE bond funds do not promote E or S criteria. None of the LTE funds have sustainable investment as an objective as defined in Article 9 SFDR. Please refer to the SFDR Pre-contractual disclosure in the prospectus, as well as the Summary related to the website product "sustainability-related disclosures". For the funds that do not promote E or S criteria, the investment manager considers ESG factors when assessing investment risks and opportunities. However, investments may in such case include issuers or sectors with a low ESG profile.
** 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.
*** Data as of: 31/05/2024
This marketing communication relates to Eurizon Fund (The “Fund”), a Luxembourg UCITS in accordance with Directive 2009/65/CE and the Luxembourg Law of 2010. This document is issued by Eurizon Capital S.A. organized as a public limited company in Luxembourg, at 28, boulevard Kockelscheuer, L-1821 Luxembourg, and authorised as management company of the Fund under the Law of 2010. This marketing communication is intended for professional investors as defined in the European Directive 2014/65/EU (MiFID) or relevant legislation in countries where the Fund is registered for distribution and is not intended for retail investors nor US Persons. Before taking any investment decision, read the Prospectus, the Key Information Document (the “KID”), and the last annual or semi-annual financial report, available in English (and the KIDs or in authorized language) on the website www.eurizoncapital.com.
This document does not constitute any legal, tax or investment advice. Past performance does not predict future returns. There is no guarantee that the forecasts will be reached in the future. Liaise with your tax and financial advisor to find out whether a product is suitable to you and understand the related risks and tax impacts. The tax treatment depends on the individual circumstances and may be subject to change in the future. A summary of investor rights is available in an official language (or authorised language) at www.eurizoncapital.com/en/investors-rights.
The Management company reserves the right to terminate the marketing arrangements of the Fund in your country. Before investing, read the risk section of the prospectus and the specific risks and costs related to the Fund. Also read the SFDR Pre-contractual disclosure, and the documents available in English or in authorized language, in the “Sustainability” section of the webpage: www.eurizoncapital.com.
SWITZERLAND:
In Switzerland this document is an advertising as per the Federal Act on Financial Services (FinSA), is intended for professional and institutional investors only and is not intended for retail investors. The representative and paying agent in Switzerland is Reyl & Cie SA, Rue du Rhône 62, CH-1204 Geneva. The prospectus, the KID, the fund regulation and the annual and semi-annual reports may be obtained from Reyl & Cie SA. Daily publication of the net asset values of the Units offered in Switzerland: www.fundinfo.com
CHILE:
In Chile when the Sub-Fund has been registered for distribution by the Comision Clasificadora de Riesgo (CCR) in Chile exclusively to Chilean Pension Funds under Agreement Nr 32 of the CCR, this document is not intended to investors who do not qualify as a Chilean Pension Funds. To find out whether this Sub-Fund is registered with the CCR, please refer to www.eurizoncapital.com.