Edhec-Risk
Features
Performance - October 20, 2005

The Agefi Asset Management Awards 2005

For the last four years, Edhec and EuroPerformance have been involved in producing the rankings for the Agefi Asset Management Awards. This year’s awards were held at Christie’s in Paris on October 19th. As in previous years, the rankings were established on the basis of the managers’ ability to produce “alpha”, or abnormal returns above and beyond the “normal” rewards due to the risks that the manager had taken.

The alpha-based rankings are based on an original methodology that was proposed by Edhec and drawn from Nobel Prize winner William Sharpe’s work on style analysis. This method is based on a return-based style analysis (RBSA) type approach, which allows a fund’s style to be characterised without any knowledge of the securities held by the fund and, as a consequence, allows for the construction of a benchmark that is appropriate and representative of the risks taken by the manager. On the basis of this benchmark, we were able to determine the fund’s alpha by using a multifactor index model where the style indices selected are used as factors.

Fund Eligibility

The EuroPerformance database contains the French and foreign mutual funds marketed in France and approved by the AMF (the French regulatory authority). Prior to the regression analysis, the database is screened in order to include the eligible funds only. The funds that are eligible for the awards have the following characteristics:

  • At least 3 years of historical weekly, bi-weekly or daily return data
  • Not more than 2 returns missing from the return history
  • No change in category during the period
  • Net assets greater than or equal to 15 million euros
For the alpha calculation model, an adjusted determination coefficient (R²) is applied. The R² must be greater than 70% for the so-called “pure” funds and greater than 60% for the diversified and international funds. At least 20 funds must be included in the same class in order for an award to be presented.

Methodology

The method is based on a Return-Based Style Analysis (RBSA) type approach, which enables the style of the fund to be characterised without having any knowledge of the securities held by the fund. As a result, a benchmark that is appropriate and representative of the risks taken by the manager can be constructed.

The fund classification is then fine-tuned by using an RBSA-type analysis based on equity and bond style indices. This approach allows customised benchmarks to be constituted. These are drawn from the combination of indices that are significant and representative of the exposure to the styles and therefore to the risks of the fund.

On the basis of these benchmarks, it is then possible to determine the excess performance of the fund by using a multifactor index model where the style indices selected are used as factors. Faced with the difficulty of finding the “true” factors that explain the returns of the fund, this approximation through indices appears robust and easy to understand since it merely extends the results of the market model (CAPM), which is well known to managers and investors, to a universe with several indices. As an absolute arithmetic value, the “alpha’ thereby determined is easily comparable within the categories selected.

Results

The winners by category of the Agefi Asset Management Awards 2005 are presented below.


North American Stocks

ManagerFundAlpha (%)
IXIS Asset ManagementCNP-Assur Amérique2.79
Pioneer InvestmentsPioneer Fund - U.S. Mid Cap Value2.73
Legg Mason Capital ManagementLegg Mason Value Fund A 2.59

Asian Stocks

ManagerFundAlpha (%)
AXA RosenbergAXA Rosenberg Japan Small Cap Alpha Fund8.06
DWS InvestmentsDWS Invest Top 50 Asia FC6.95
Sinopia Asset ManagementSinopia Multi Index Fund Japan Index Plus 4.58

Euro Stocks

ManagerFundAlpha (%)
Crédit Suisse Asset ManagementCrédit Suisse Equity Fund (Lux) Small Cap Germany9.13
Dexia Asset ManagementDexia Equities B Mediterranean Classic Cap6.47
UBS Global Asset ManagementUBS (Lux) Equity Fund - Euro Countries Opportunity 3.95

European Stocks

ManagerFundAlpha (%)
AXA Investment Managers ParisAXA Europe du Sud8.26
Louvre GestionGrande Europe4.45
Fidelity InvestissementsFidelity Investment Funds European Fund 4.45

French Stocks

ManagerFundAlpha (%)
Tocqueville FinanceTocqueville Dividende10.83
Fortis InvestmentsFortis France PME9.64
Oddo Asset ManagementOddo Avenir 9.61

International Stocks

ManagerFundAlpha (%)
Ecofi InvestissementsEcofi Actions Rendement4.14
Morgan Stanley Investment ManagersMorgan Stanley Global Brands Fund3.96
AXA RosenbergAXA Rosenberg Global Small Cap Alpha Fund3.38

Sectorial Stocks

ManagerFundAlpha (%)
Merrill Lynch Investment ManagersMLIIF World Financials1.54
Dexia Asset ManagementDexia Invest Telecommunication Classic Cap1.52
Fidelity InvestissementsFidelity Funds Industrials Funds1.14

Euro Diversified

ManagerFundAlpha (%)
Aviva Gestion d'ActifsAFER-SFER1.70
Aviva Gestion d'ActifsVinci Profil Equilibre1.58
Generali FinancesGenerali Ambition 1.29

International Diversified

ManagerFundAlpha (%)
Thiriet GestionVictoire Sirius3.53
Dexia Asset ManagementDexia Invest Global Low Classic Cap3.38
BFT GestionIena Patrimoine2.65

Euro Bonds

ManagerFundAlpha (%)
Groupama Asset ManagementGroupama Oblig Euro Crédit LT2.52
CM-CIC Asset ManagementCrédit Mutuel Institutionnels Long Terme1.30
Aviva Gestion d'ActifsVictoire Oblirea 1.05

European Bonds

ManagerFundAlpha (%)
BNP Paribas Asset ManagementBNP Paribas Obli Europe1.23
IXIS Asset ManagementIXIS Convergence1.06
Aviva Gestion d'ActifsVictoire Sécurité Europe 0.94

International Bonds

ManagerFundAlpha (%)
Pacific Investment ManagementSkandia Total Return USD Bond Fund1.64
Invesco Asset ManagementInvesco GT Bond1.25
Schroder Investment ManagementSchroder ISF Global Corporate Bond A Cap1.24

Attachments

Methodology

URL for this document:
http://www.edhec-risk.com/features/RISKArticle.2005-10-20.4519

Hyperlinks in this document: