Dual high-performing engines at work.
In the turbulent world of finance, finding a strategy that thrives in volatile market conditions is a rare gem. One such strategy belongs to Candriam, a company that has been managing arbitrage strategies for 15 years with impressive results.
Candriam's portfolio builds arbitrage positions based on relative value strategies, exploiting relative price differences between two similar instruments. This approach has proven effective, with little impact from directional market trends. In fact, the company's equity market-neutral approach did not expose it to popular transactions among arbitrage fund managers in 2020.
The investment process combines two complementary arbitrage strategies, involving the purchase and sale of stocks. The selection of contracts for portfolios involves quantitative tools for identifying investment opportunities, independent of news flow and market volatility. This approach allows for adjusting the size of positions and hedging them efficiently in the current market.
The performance of Candriam's approach is expected to be independent of the development of equity and bond markets. This was evident in 2020, when the company achieved a gain of 17.2% (after fees, from 31.12.2019 to 31.12.2020), despite the challenging market conditions. The portfolio has also seen a 5.1% increase since the beginning of the year (after fees, from 31.12.2020 to 31.03.2021).
In volatile market phases, the prices of index components fluctuate more strongly. This volatility can lead to the domino effect, causing transactions to trigger stop-loss limits and forcing funds to sell positions. However, Candriam's strategies seem to have weathered these storms well, with fewer arbitrageurs positioning themselves in the same way providing more room for maneuver.
The valuation process and qualitative analysis are applied before entering a specific position to understand and evaluate risk factors. This careful approach, coupled with the strategies' ability to profit from price fluctuations during regular rebalancing, with additions and deletions in the composition of the major indices each month, has contributed to Candriam's success.
The strategies are initially applied to major global indices such as S&P 500, Euro Stoxx, and DAX. The current environment is likely to remain favorable, suggesting good performance gains for Candriam in the future.
Despite the impressive performance, it's important to note that past results are not a guarantee of future performance. However, Candriam's track record in turbulent market phases and its unique approach to arbitrage strategies make it a company worth watching in the years to come.
