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Performance Measurement - April 17, 2008

Alpha League Table France 2008

The reference rankings in Europe

The Alpha League Table compares asset management companies on the basis of their capacity to deliver positive alphas. The table’s leading companies are the best providers of alpha, i.e., those that offer a good compromise between the value and frequency of the alphas produced. Only the top 25 were selected, based on the number of funds analysed and the regularity with which alpha is created.

The third ranking for France reveals that both the frequency of alpha and the average alpha generated by French asset managers have fallen in comparison with the 2007 edition.

Average alpha dropped from 2.98% to 2.50%, a decline that may be attributed in part to the behaviour of small-cap stocks. Small-cap stocks, which in France have a large role in the production of alpha, fell over the second half of 2007, just as broad-based indices did. Likewise, frequency of alpha has dropped (from 27.6% to 29.8%).

All the same, the top ten companies have put up fierce resistance, conceding but a moderate drop in their alpha while improving their frequency (40.5% vs. 38.1%).

This edition of the Alpha League Table once again gives pride of place—eight of the top ten spots— to asset management firms (either specialised firms affiliated with banks or independents whose capital is held by management).

The Results

HSBC Private Bank France, second in 2007, takes the top spot in 2008. The firm, which handles the private banking activities of HSBC France, has a greater frequency of funds generating outperformance—53.2%—than it did last year. For the year, average alpha was 2.89%, for an overall score of 1.52. These excellent results are all the more meaningful in that alpha was produced over five investment categories.

Like those of the holder of the 2008 top spot, the results of MMA Finance, which comes in second, are synonymous with soundness and homogeneity over time. The firm, in eighth place last year, has a score of 1.43 this year, the result of alpha of 2.87% and frequency of alpha of 50%. Frequency is higher than it was last year and overall alpha was stable. In addition, the firm’s management expertise covers four distinct investment categories.

State Street, third in these rankings and noticed for its high frequency last year, confirms yet again its good results, with higher alpha, in particular (2.52% vs. 1.15%). Frequency is at 53.3% as opposed to 57.4% last year. The spectrum of funds producing alpha includes seven investment categories.

Fourth place belongs to a newcomer to our rankings. Ecofi Investissements, a subsidiary of Crédit Coopératif, obtains a score of 1.27. At 25.6% frequency contributes less to this score than it does to the scores of the top three, but the high alpha generated by a vehicle specialised in high return securities allows the firm to post an average outperformance ratio of 5.77%.

The rankings also spotlight independent asset managers, three of which are in the top ten. In 2008, Carmignac makes a noteworthy jump into fifth place in the rankings. The funds managed by the firm deliver returns higher than those of the universe in which they are invested more than 65% of the time, the greatest frequency of any company in the rankings. With average alpha of 1.65%, the overall score is 1.07.

Another firm with consistent results is Comgest, which is in sixth place this year after having taken fifth place the year before. Its score of 1.05 is the result of a frequency of 40.7% and alpha of 2.58%.

Thanks to noteworthy returns on an emerging Europe fund, Métropole Gestion generated average alpha of 5.56%. Uneven results over investment categories mean an alpha frequency of 17%, the lowest frequency of the companies in the top ten. With a score of 0.96, Métropole Gestion takes seventh place.

Last year’s winner, ODDO Asset Management, which experienced a greater than average fall in average alpha, is in eighth place this year. The proportion of its funds generating alpha fell as well. Average alpha was 2.34% and frequency 39.7%. The firm obtains a score of 0.94.

After MMA Finance, the second insurer in the rankings is AXA Investment Managers, in ninth place. Its range of alpha funds includes six categories of analysis. The alpha generated may be less than it was the year before (2.32% vs. 3.74%), but frequency has improved. The score of 0.83 comes from alpha of 2.32% and frequency of 37.8%.

With its particularly productive management of international investments, La Compagnie 1818 – Gestion rounds out the top ten. Like that of the other newcomers to the Alpha League Table, its frequency— 22.3%—is low, but its 4.08% average alpha is well above that of the average of our top twenty-five.

The other insurers in the rankings are Cardif Gestion d’Actifs (16th), Fédéris Gestion d’Actifs (18th), AGF Asset Management (19th), Groupama Asset Management (20th), and Aviva Gestion d’Actifs (24th).

Among the banks, Palatine Asset Management (11th), Natixis Asset Management (12th), and BNP Paribas Asset Management (13th) are joined by three other heavyweights: Crédit Agricole Asset Management (14th), La Banque Postale Asset Management (23rd), and Société Générale Asset Management (25th).

Among the specialists, improved results for Meeschaert Asset Management (21st), as well as the arrival of Rothschild & Cie Gestion (22nd), are to be contrasted with falling scores for EDRAM (15th) and Martin Maurel Gestion (17th), which last year came in fourth and third respectively.

Results of the Top 25

Changes in the Rankings

The newcomers to the rankings, most of them specialised firms, such as Carmignac Gestion, Métropole Gestion, and La Compagnie 1818 – Gestion, go directly to the top ten. Rothschild & Cie Gestion is twenty-second.

The Crédit Coopératif subsidiary Ecofi Investissements goes straight to 4th place. Crédit Agricole Asset Management enters the rankings this year in 14th place, as well as La Banque Postale Asset Management, which comes in at 23rd place and Société Générale Asset Management at 25th. Finally, the insurers Fédéris Gestion d’Actifs and Groupama Asset Management come in at 18th and 20th respectively.

The results for 2007 no longer allow the following companies to appear in the top twenty-five: BFT Gestion, Lazard Frères Gestion, CM CIC AM, Etoile Gestion, and Generali Finances. Financière Atlas, CCR Gestion, Halbis Capital Management, and Gestion Privée Indosuez are not ranked in the Alpha League Table 2008 because they were unable to compete over the twelve months.

The biggest jump in this year’s edition was by a specialised firm that had already stood out last year for its frequency of alpha. In 2007, State Street Global Advisors, in addition to maintaining its high frequency (53.8%), improved its alpha considerably. The firm moved up sixteen places in the ranking.

By contrast, three of last year’s top five firms fell in the rankings. Oddo Asset Management (- 7 places) and Edmond de Rothschild Asset Management (- 11 places) post significant drops in the persistence of alpha production. Martin Maurel Gestion falls fourteen places.

It is also possible to analyse by investment zone the alpha produced by the companies spotlighted by the Alpha League Table.

This edition confirms that the search for outperformance in the home markets of these firms has dropped off slightly, as the funds producing alpha from French securities account for only 19.4% of all funds, as opposed to 24% last year. The alpha they generate, however, although clearly lower than last year’s, is still among the highest generated in any investment zone (2.34%).

Greater and greater demand for diversification, along with an expansion of offers, has driven the industry to turn towards much larger investment zones such as Europe (14.5%) and International (21.5%). In fact, good results in these zones have pushed up the average alpha of the firms at the top of our rankings.

Breakdown of four- and five-star funds by investment zone

Source: EuroPerformance – Data as of 31 December 2007

Average alpha by investment zone

In 2007 the alpha generated by French asset managers was less than in 2006. Levels of alpha dropped especially in France, but also in emerging markets, in Asia (excluding Japan), and in European sector funds.

Other investment zones, on the contrary, allowed asset managers to increase the alpha they generate. Average alpha rose for funds in International markets and in Japan.

Average Alpha by investment zone

Source: EuroPerformance – Data as of 31 December 2007

Management style of the four- and five-star investment funds by investment zone

Style-factor analysis shows that, compared to last year, there has been a clear reduction in portfolio exposure to small-cap and mid-cap stocks. These stocks, the major sources of alpha in the French, European, and euro-zone markets, likewise account for smaller shares of instruments invested in Japan.

Another reason can be found in the large current falls in the stock markets, in the wake of the turbulence experienced by the shares of financial companies. As the shares of these companies make up a large share of value-type indices, 2007 has seen a tilt towards growth-style. A simple analysis of the management styles adopted since the beginning of the decade shows the significance of the change effected in 2007. Value-oriented funds and small-caps may have monopolised the top spots in performance rankings for years, but in 2007 growth styles, driven largely by the energy and technology sectors, outperformed.

Management of 4- and 5-star funds by investment zone

Source: EuroPerformance – Data as of 31 December 2007

Delta 2006/2007 of management styles by investment zone

Source: EuroPerformance – Data as of 31 December 2007

At the EuroPerformance–EDHEC Alpha League Table Forum during the EDHEC Institutional Days at the CNIT in Paris on June 12 and 13 , the asset managers recognised in the Alpha League Table for the quality of their management of equities in Europe will present their investment processes and discuss the sources of their outperformance.

Several themes, such as generating alpha in the equity universe, picking stocks in emerging markets and investing in the major stocks of the future, will be addressed at the conference by BNY Mellon Asset Management, Halbis, Vontobel Asset Management, Oddo Asset Management, State Street Global Advisors and F&C Investments.

For any further information, or to register for the forum, please contact Sabine Lacourcelle at eid2008@edhec-risk.com or by telephone: +33(0)4 93 18 78 19.

Related links

The Style Rating Website