LO Selection - Shânti Convertibles Asia
Investment objective
The LO Selection - Shânti Convertibles Asia subfund seeks long-term gains on capital invested, through active management of convertible bonds from Asia Pacific excluding Japan. The subfund's objective is to outperform the benchmark index Jefferies Active Convertible Index (JACI) Asia ex Japan.
Appeal of Asian convertible bonds
The Asian market boasts very sharp growth in GDP. This drives some companies to carry out capital increases or issue debt to finance their growing balance sheet, even if their equity is adequate to support their development. As local currency rates are often high, the companies have an incentive to issue convertible bonds in low-rate currencies like the dollar (or HKD or SGD).
Access to domestic stock markets is often restricted, meaning that arbitrage is limited between equities and convertible bonds. These instruments therefore end up with considerable discounts compared with valuations of equivalent securities in Europe. This unique situation is likely to last, making this an attractive, constantly profitable investment. Exceptions include periods of credit pressure like in 2008, but these are followed by periods of extremely high performance.
Lastly, some of these currencies are deemed undervalued. A convertible bond in dollars or a strong currency (HKD, SGD, CNY, etc.) with an underlying asset in an Asian currency likely to rise is all the more appealing.
Investment principles and strategy of LOS - Shânti Convertibles Asia
The investment process is essentially bottom up. The fund selects the convertible bonds which are strong in their technical aspects, rather than those considered to have a high-potential underlying asset. Shânti Asset Management has always believed that in these imperfect markets it is easier to form an opinion about the convertible bond's credit spread/volatility than the stock's market value.
Securities are rated on a scale from 1 to 5 in terms of credit risk. Only bonds with a rating higher than 3 are purchased for the portfolio. The companies whose balance sheets and cash flow forecasts have been analysed by our team in Mumbai are favoured.
The investment universe can include companies registered outside Asia, but they must have a strong emerging component in line with the investment strategy to capture growth in Asia.
Liquidity risk is monitored on a line-by-line basis. Each security in the investment universe is rated on a scale of 0 to 2, with a maximum of 3% of bonds with poor ratings and only with short maturities.
A maximum of 20% of the portfolio can be inverted into shares.
The portfolio's overall sensitivity to equities is managed on a daily basis by aggregating the delta of each line, falling within a range of 30%-70%.
The geographical breakdown is a result of the stock-picking strategy. The two main countries (India and China) will not exceed 50% each.
Fund description
The LO Selection - Shânti Convertibles Asia subfund seeks long-term gains on capital invested, through active management of convertible bonds from Asia Pacific excluding Japan. The subfund's objective is to outperform the benchmark index Jefferies Active Convertible Index (JACI) Asia ex Japan.
Appeal of Asian convertible bonds
The Asian market boasts very sharp growth in GDP. This drives some companies to carry out capital increases or issue debt to finance their growing balance sheet, even if their equity is adequate to support their development. As local currency rates are often high, the companies have an incentive to issue convertible bonds in low-rate currencies like the dollar (or HKD or SGD).
Access to domestic stock markets is often restricted, meaning that arbitrage is limited between equities and convertible bonds. These instruments therefore end up with considerable discounts compared with valuations of equivalent securities in Europe. This unique situation is likely to last, making this an attractive, constantly profitable investment. Exceptions include periods of credit pressure like in 2008, but these are followed by periods of extremely high performance.
Lastly, some of these currencies are deemed undervalued. A convertible bond in dollars or a strong currency (HKD, SGD, CNY, etc.) with an underlying asset in an Asian currency likely to rise is all the more appealing.
Investment principles and strategy of LOS - Shânti Convertibles Asia
The investment process is essentially bottom up. The fund selects the convertible bonds which are strong in their technical aspects, rather than those considered to have a high-potential underlying asset. Shânti Asset Management has always believed that in these imperfect markets it is easier to form an opinion about the convertible bond's credit spread/volatility than the stock's market value.
Securities are rated on a scale from 1 to 5 in terms of credit risk. Only bonds with a rating higher than 3 are purchased for the portfolio. The companies whose balance sheets and cash flow forecasts have been analysed by our team in Mumbai are favoured.
The investment universe can include companies registered outside Asia, but they must have a strong emerging component in line with the investment strategy to capture growth in Asia.
Liquidity risk is monitored on a line-by-line basis. Each security in the investment universe is rated on a scale of 0 to 2, with a maximum of 3% of bonds with poor ratings and only with short maturities.
A maximum of 20% of the portfolio can be inverted into shares.
The portfolio's overall sensitivity to equities is managed on a daily basis by aggregating the delta of each line, falling within a range of 30%-70%.
The geographical breakdown is a result of the stock-picking strategy. The two main countries (India and China) will not exceed 50% each.
Fund description
Name |
LOS Shânti Convertibles Asia I Shares (in EUR)
|
LOS Shânti Convertibles Asia P Shares (in USD)
|
LOS Shânti Convertibles Asia P Shares (in EUR, EUR / USD hedged) |
| Legal form | A sub-fund of Lombard Odier Selection, a SICAV incorporated in Luxembourg, UCITS IV |
A sub-fund of Lombard Odier Selection, a SICAV incorporated in Luxembourg, UCITS IV | A sub-fund of Lombard Odier Selection, a SICAV incorporated in Luxembourg, UCITS IV |
| Inception date | August 27, 2010 | August 27, 2010 | December 16, 2010 |
| Investor profile |
Class I EUR ACC is for institutional invstors only |
Class P USD ACC is for all investors |
Class P USD ACC is for all investors |
| Minimum initial subscription amount |
500 000 Euros | 10 000 US Dollars | 10 000 Euros |
| ISIN Code |
LU0532304820 | LU0532304747 | LU0558888094 |
| Maximum fixed management fees |
1.20% |
2.00% |
2.00% |
| Performance fees |
15% over JACI ex Japan in EUR with HWM |
10% with HWM |
10% with HWM |
| Currency | EUR | USD | EUR |
| Maximum front-end fee | 0.75% paid to the fund | ||
| Distribution/Capitalisation | Capitalisation | ||
| Custodian | CACEIS BANK LUXEMBOURG | ||
| Valuation | Weekly (Thursday, Th) | ||
| Transfer agent - Subscriptions and redemptions | CACEIS LUXEMBOURG 5, allée Scheffer L-2520 Luxembourg Grand Duchy of Luxembourg Tel.: +352 47 67 59 28 Fax: +352 47 67 70 63 Your custodian must place the order by fax with CACEIS Bank Luxembourg before 3.00 pm on Wednesday. The original must follow by post. Subscriptions/Redemptions at NAV (net asset value) on D in amount or number of shares. Settlement in D + 3 business days |
||
| Initial NAV |
EUR 1,000 | USD 1,000 |
EUR 1,000 |