Fitch Affirms La Francaise AM`s Asset Management Rating at `High

8/27/2014
Fitch Ratings | Press Release
Tagging Info
Fitch Affirms La Francaise AM's Asset Management Rating at 'High Standards'
Ratings Endorsement Policy
27 Aug 2014 6:44 AM (EDT)
Fitch Ratings-Paris/London-27 August 2014: Fitch Ratings has affirmed la Francaise AM's Asset Manager
Rating at 'High Standards'. The Outlook is Stable.
KEY RATING DRIVERS
The affirmation reflects La Francaise AM's diversified asset mix, long-standing committed shareholder and
staffing depth. It takes into account the company's robust control framework and technological platform, which
is able to adapt swiftly to new business needs. The rating is further underpinned by La Francaise AM's ability to
attract and retain experienced staff while strengthening investment capabilities through targeted partnerships.
The main challenges facing La Francaise AM are reinvigorating its equity investment process, stabilising
cross-asset and emerging market fixed income portfolio management, further strengthening operational
workflows and maintaining effective risk management oversight while broadening its client base's
international footprint.
La Francaise AM's 'High Standards' rating is based on the following (unchanged) category scores:
Company: Highest
Controls: High
Investments: High
Operations: High
Technology: Highest
Asset manager operations in the 'High Standards' category demonstrate an investment platform and
operational framework that Fitch considers strong relative to the standard applied by international institutional
investors.
Company
The company is profitable, supported by a sufficiently broad product range and a diversified but mainly
domestic client base. It also benefits from a long-standing relationship with its financially strong parent, CMNE,
an investment-grade regional bank. The company's long history and experienced teams have been broadened
by recent high-profile hires, and by partnerships with Inflection Point Capital Management (IPCM) and Tages
Capital. These two new partnerships strengthen La Francaise AM's capabilities in environmental-, social- and
governance-investing and allow the company to scale up fund-of- hedge fund management, respectively. La
Francaise AM also increased its participation in JK Capital Management, its Asian equity specialist.
Controls
La Francaise AM has a well-structured and -resourced risk and control framework with adequate
independence from the investment and operational teams. Compliance and controls procedures are
supported by built-in controls in the company's backbone application and by direct and well-interfaced access
to that tool. Investment risk management resources have been strengthened by the recent addition of the
financial engineering team, and the combined team's direct reporting line to the company's CEO emphasises
a strengthened oversight structure.
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Investments
Investment management resources organisation and processes have been revisited in early 2014, following
the departure of the former chief investment officer (CIO), and the operations with IPCM and Tages Capital. The
result is a leaner organisation, with a more direct reporting line to the CEO, which devolves greater
responsibility to investment team heads and portfolio managers.
Fundamental research-driven investment processes are implemented in a disciplined manner that
emphasises top-down inputs and committee-driven decision-making. Revised investment committees allow
greater flexibility and effective information-sharing across investment teams. Fixed-income processes have
remained stable. Cross-asset, emerging market and equity investment processes have been revisited in 2014
for more robustly-defined performance drivers, risk monitoring and implementation process.
Operations
Investment operations are scalable, organised around a highly-automated operational workflow, although for
fixed income and complex OTC instruments the workflow lacks fully integrated system capabilities.
Comprehensive client reporting is of high quality and among the best market standards. Fund administration
and custody are primarily delegated to BNP Paribas Securities Services.
Technology
La Francaise AM's proprietary IT platform, Light Trade, is fully integrated and efficiently supports the company's
activities. It is regularly enhanced to accompany the company's development. Vendor solutions interfaced with
Light Trade complement the technological set-up, notably in the areas of risk, controls and reconciliations.
Business continuity and recovery planning is robust and regularly tested.
Company Profile
La Francaise AM is the securities management arm of La Francaise group, a French asset management
company, 86% owned by Credit Mutuel Nord Europe. It groups La Francaise des Placements (LFP), La
Francaise Inflection Point (LFIP), JK Capital Management and La Francaise International Claims Collection
and managed EUR30.1bn of assets as of end-June 2014. Fitch's rating scope includes fixed income, crossasset and equity portfolio management activities undertaken by LFP and LFIP.
RATING SENSITIVITIES
The rating may be downgraded as a result of material adverse changes to any of the aforementioned rating
drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes
and policies.
Contact:
Primary Analyst
Charlotte Quiniou, CFA
Director
+33 1 44 29 92 81
Fitch France S.A.S.
60 rue de Monceau
Paris 75008
Secondary Analyst
Francois Vattement, CFA
Associate Director
+33 1 44 29 92 75
Committee Chairperson
Alastair Sewell, CFA
Senior Director
+44 207 530 1147
Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: [email protected]; Elaine
Bailey, London, Tel: +44 203 530 1153, Email: [email protected].
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Additional information is available on www.fitchratings.com
Applicable criteria, 'Asset Manager Rating Criteria, dated 6 May 2014, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Asset Manager Rating Criteria
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