Equity Market Neutral: the answer to investors’ decorrelation expectations

Equity market neutral strategies are designed with the aim to provide returns uncorrelated to the broader markets. The Candriam Absolute Return Equity Neutral Fund aims to achieve this objective by taking advantage of share price anomalies created by passive (index) funds.

Index funds represent a powerfully large proportion of the investment market, and it continues to expand. Given the volumes involved, index funds’ regular trades to replicate changes in the composition of their respective benchmarks typically lead to price and valuation spread opportunities. It is those price anomalies that our fund was built to exploit.

It aims to do so by using an approach called index rebalancing arbitrage, which our fund was one of the first in the market to adopt when we launched it about 20 years ago. The fund applies its sophisticated quantitative tools and our statistical analysis to cover potential inefficiencies in the pricing of 5,000 European and North American stocks.

Our Approach

We combine engineered discipline with discretionary and quantitative analysis, aiming to deliver investment gains over a 3-year investment horizon with a target volatility of about 6%, regardless of market conditions:

• Our investment process employs two independent portfolio strategies for different market conditions. It is not just a competitive edge but also a way to diversify how we generate alpha.
• Supported by a blend of the efficiency of quantitative stock selection and fundamental risk analysis
• Where applicable, we would consciously avoid taking a market position which in our view is crowded by other participants

The performance of the Candriam Absolute Return Equity Market Neutral Fund in contrast to Eurozone equities since 2016.

Source: Bloomberg, Candriam – data from 01.03.2016 to 06.08.2021. The MSCI© EU Index is not a benchmark of the Candriam Absolute Return Equity Neutral Fund.

Benchmark: EONIA (Interest Rate). The fund is actively managed and the investment process implies referring to a benchmark index.

Past performance is no guarantee of future results and is not constant over time.

Risks of the fund

• Please be aware that any investment involves risks :  capital-loss risk, equity risk, derivatives risk, arbitrage risk, counterparty risk.
• The value of the investment could fall, in particular because of the fund’s exposure to the main risks mentioned in the prospectus and in the fund’s KIID.

To fully understand the fund’s risk profile, we advise investors to carefully read the Key Investor Information Document (KIID), the fund prospectus and description of the underlying risks: capital-loss risk, equity risk, derivatives risk, arbitrage risk, counterparty risk. The value of the investment could fall, in particular because of the fund’s exposure to the main risks mentioned in the prospectus and in the fund’s KIID.

Candriam Absolute Return Equity Market Neutral, a SICAV under Luxembourg law, managed by Candriam Luxembourg, aims to deliver consistent performance with low sensitivity to market changes

• An investment process with a track record of over 15 years
• A stable, experienced management team of 4
• AuM of more than EUR 320 million on 11.08.2021

BEFORE YOU INVEST

This marketing communication is provided for information purposes only, it does not constitute an offer to buy or sell financial instruments, nor does it represent an investment recommendation or confirm any kind of transaction, except where expressly agreed. Although Candriam selects carefully the data and sources within this document, errors or omissions cannot be excluded a priori. Candriam cannot be held liable for any direct or indirect losses as a result of the use of this document. The intellectual property rights of Candriam must be respected at all times, contents of this document may not be reproduced without prior written approval.

Warning: Past performances of a given financial instrument or index or an investment service or strategy, or simulations of past performances, or forecasts of future performances are not reliable indicators of future performances and are not guaranteed. Please be aware that an investment in a fund is different from an investment in deposits and that the investment’s principal is capable of fluctuation. The fund does not rely on external support for guaranteeing its liquidity or stabilizing its NAV per unit or share. The risk of loss of the principal is borne by the investor. Gross performances may be impacted by commissions, fees and other expenses. Performances expressed in a currency other than that of the investor's country of residence are subject to exchange rate fluctuations, with a negative or positive impact on gains. If the present document refers to a specific tax treatment, such information depends on the individual situation of each investor and may change.

Candriam consistently recommends investors to consult via our website www.candriam.com the key information document, prospectus, and all other relevant information prior to investing in one of our funds, including the net asset value (“NAV) of the funds. This information is available either in English or in local languages for each country where the fund’s marketing is approved.

Investor rights and complaints procedure, are accessible on Candriam’s dedicated regulatory webpages https://www.candriam.com/en/professional/legal-and-disclaimer-candriam/regulatory-information/. This information is available either in English or in local languages for each country where the fund’s marketing is approved. According to the applicable laws and regulations, Candriam may decide to terminate the arrangements made for the marketing of the Fund at any time.

Specific information for Swiss investors: The appointed representative and paying agent in Switzerland are respectively CACEIS (Switzerland) SA, Route de Signy 35, CH-1260 Nyon and CACEIS Bank, Paris, succursale de Nyon/Suisse, Route de Signy, 35, CH-1260 Nyon. The prospectus, the key investor information, the articles of association or as applicable the management rules as well as the annual and semi-annual reports, each in paper form, are made available free of charge at the representative and paying agent in Switzerland.

Specific information for investors in France: the appointed representative and paying agent in France is CACEIS Bank, Luxembourg Branch, sis 1-3, place Valhubert, 75013 Paris, France. The prospectus, the key investor information, the articles of association or as applicable the management rules as well as the annual and semi-annual reports, each in paper form, are made available free of charge at the representative and paying agent in France.

Specific information for investors in Spain: Candriam Luxembourg Sucursal en España has its registered office at C/ Pedro Teixeira, 8, Edif. Iberia Mart I, planta 4, 28020 Madrid and is registered with the Comisión Nacional del Mercado de Valores (CNMV) as an European Economic Area management company with a branch. The Fund is registered with the CNMV with the number 657.