Longchamp Autocall Fund

Longchamp Autocall Fund Strategy

The Longchamp Autocall Fund (the “Fund”) seeks to deliver an annualized performance net of fees higher than that of EONIA capitalized + 6.30% over the recommended investment period of 5 years minimum.

To achieve this goal, the investment manager essentially implements a strategy based on an Autocall portfolio diversified in terms of underlyings, issuers and entry points.

The Fund is structured around two main blocks:

  • A “Core” allocation, the Autocall portfolio
  • A “Satellite” allocation, the Diversification portfolio

The allocations’ weightings target 70% for the Autocall portfolio is 70% and 30% for the Diversification portfolio.

The “Satellite” portfolio of diversification aims to mitigate the effects of significant equity market corrections.

Characteristics of the Strategy:

  • Exposure to European and U.S. equity markets
  • More defensive profile than direct exposure to equity markets
  • Diversification of issuers, entry points and sectors
  • Partial protection of capital
  • Underperformance vs underlying in bull markets

Longchamp Asset Management benefits from its team’s expertise in structured products and has developed a unique expertise around three main blocks:

  • Research: Selection tools of the most interesting underlyings from a quantitative and qualitative point of view
  • Technical: Independence in the valuation of instruments for risk analysis
  • Execution: Best price and selection, and diversification of counterparties

Market Players

Autocall Functioning

Focus on Payoff at Maturity

Investment Strategy and Objective

Performance as of 27/05/2020

NAVMTDYTDLTD
862.82€3.13%-13.72%-13.72%
Loading

Past performance is not an indicator of future performance. 

Details

Strategy
  • Autocall Fund
Indice de référence
  • The annualized performance net of fees can be compared to:
    • EONIA Capitalized + 5% for the share class C
    • EONIA Capitalized + 6% for the share classes B and D
    • EONIA Capitalized + 6.30% for the share class A
Investment Universe 
  • The Autocall portfolio underlyings are U.S. and European main equity indices or equities from these indices
  • Autocalls can have one or more underlyings
  • The investment management team selects the Autocalls by seeking a balance between the choice of coupons, the capital protection barriers, the coupon protection barriers and the early recall barriers
  • The investment management team may also invest in diversification strategies aiming to provide decorrelation to equity markets

Risk Profile

The risks to which the holders are exposed are as follows:

  • Risk of loss of capital: the Fund does not benefit from any guarantee or protection; therefore, the capital initially invested may not be returned even if subscribers hold their units for the recommended investment period.
  • Risk related to the loading period of the portfolio (“Ramp-Up”): during the Ramp-Up (which may extend over several months), the Fund may not be fully exposed to the Autocall strategy. Consequently, during this period, the Fund’s performance may be less than the performance objective.
  • Risk related to discretionary management: when managing the Fund, the Investment Manager uses a specific investment process, techniques and risk analysis in its investment decisions, but there is no guarantee that its investments decisions will produce the expected results. In particular, the Investment Manager may not select the types of Autocalls or equity indices, equity sectors as Autocalls reference underlyings that would have delivered a better performance. In addition, the Investment Manager may decide not to fully expose the Fund to the Autocalls strategy for a period whereas full exposure would have delivered a better performance. As a result, the management objective may not be achieved and the investor may experience capital losses.
  • Equity market risk: stock and equity indices prices on the equity market may fluctuate according to investors’ expectations. The Fund may experience significant fluctuations in prices at any time, both upwards and downwards (due in particular to the price evolution of the underlying instruments), which may end up in some cases to the total loss of the amount invested. The drop of equity markets may lead to a drop of the Fund’s net asset value.
  • Implied volatility risk: the Fund is exposed to derivative products whose valuation depends on variables that are not observable directly on the financial markets and that are difficult for the investor to observe. In particular, an increase in the implied volatility of the underlying most often causes a decline in the valuation of derivatives, which results in a fall in the net asset value of the Fund.
  • Interest rate risk: Interest rate risk is the risk of depreciation of rate instruments (long-term and/or short-term) resulting from the variation of interest rates. For example, the price of a fixed-rate bond tends to fall in the event of a rise in interest rates. The Fund is indirectly sensitive to changes in interest rates via its investments in Autocalls: in the event of a significant rise in interest rates, the value of the assets may fall.
  • Currency risk: The fund is exposed to currency risk. It may be exposed to securities with embedded derivatives in USD.
  • Counterparty risk: counterparty risk arises from the Fund’s use of over-the-counter (OTC) held financial instruments and/or temporary securities purchase and sale operations. The Fund is exposed to the risk that the counterparty will not fulfill its performance obligations under the OTC (in particular the Autocalls). The default of the counterparty (or the default of the counterparty to any of its obligations) in the context of these transactions may have a material adverse effect on the Fund’s net asset value.
  • Risks relating to securities financing transactions and risks related to the management of financial guarantees: these transactions and related guarantees may create risks for the Fund, such as:
    • Counterparty risk (as previously described),
    • Legal risk,
    • Risk of conservation,
    • Liquidity risk (i.e. the risk resulting from the difficulty of buying, selling, terminating or valuing a security or a transaction due to a lack of buyers, sellers or counterparties), and where appropriate,
    • Risks related to the reuse of collateral (i.e. mainly the risk that the financial guarantees delivered by the Fund will not be returned to it, for example as a result of the default of the counterparty).
  • Liquidity risk: the counterparties selected in “direct method” (purchase of Securities) and/or “synthetic exposure method” (via swap) are selected on a commitment of liquidity of the instruments. Nevertheless, the fund may remain exposed to a liquidity risk. Financial futures are inherently liquid enough, but under certain circumstances may have a low level of liquidity. In addition, the Fund may be exposed to trading difficulties or the temporary inability to trade certain securities in which the Fund invests or those received as collateral, particularly in the event of a counterparty’s failure to trade and temporary acquisitions and sales of securities and/or total return swaps (TRS).
  • Derivative risk: the Fund uses derivatives that are OTC derivatives for investment and/or hedging purposes. These instruments are volatile and may be subject to various types of risks, including but not limited to market risk, liquidity risk, counterparty risk, legal risk and operational risk. In addition, investments in OTC derivatives may have limited liquidity in the secondary market and it may be difficult to evaluate such a position. For these reasons, there is no guarantee that derivative strategies will achieve the intended purpose.
  • Specific risks related to Autocalls: an Autocall has a variable maturity and can be recalled early on a reminder date. In the event of an early recall of an Autocall or a maturity, the Fund may be subject to reinvestment risk because the Fund may not be able to replace it with an Autocall offering similar characteristics. In the case of Autocalls on several underlyings, the Fund may be exposed to a risk of correlation between the underlyings.
  • Risk related to investment in barrier option derivatives: the Fund is exposed to derivatives whose valuation depends on the level of the underlying on certain dates. The sensitivity of the Fund’s valuation to variations of the underlyings’ prices is increased close to these dates, in particular, at certain market levels that may amplify upwards or downwards the market movement effect of the Funds’ underlyings.
  • Risk of partial participation in the rise of the equity market: between their launch date and maturity, the evolution of Autocall’s value may deviate from that of their underlying stock or index. In particular, the performance of these products since inception is limited upward by the earnings cap mechanism (conditional coupons); therefore, the shareholder may only partially benefit from the increase in underlying shares or equity indices.

Fund Facts

Legal Structure:French UCITS FCP
Umbrella Fund:N/A
Fund Manager:Longchamp Asset Management SAS
Passporting:Authorized in France
Base Currency:EUR
Liquidity:Daily
Dealing Deadline (Subscription):12:00 pm French Time 5 Business Day prior to the relevant Dealing Day
Dealing Deadline (Redemption):12:00 pm French Time 5 Business Day prior to the relevant Dealing Day
Settlement Date (Subscription):Within 5 Business Day after the relevant Dealing Day
Settlement Date (Redemption):Within 5 Business Day after the relevant Dealing Day

Key Professionals

David Armstrong
Chief Investment Officer 

David is Chief Investment Officer at Longchamp Asset Management. Previously, he was a Managing Director at Morgan Stanley & Co. International Plc, acting as global head of the investment bank’s Funds and Fund Linked business. In particular, he was in charge of the FundLogic Alternatives Plc (UCITS) Platform and served as President of the French asset management company, FundLogic SAS. Before joining Morgan Stanley, David worked at Société Générale Corporate & Investment Banking in the Equity Derivatives division in Paris before moving to Milan to take the responsibility for the Italian Capital Markets, and then joining Société Générale’s New York office to head the Structured Products division for the Americas. David holds a master’s degree in Business Administration from EDHEC, Lille, France.

Isabelle Mérou
Portfolio Manager

Isabelle is a Portfolio Manager at Longchamp Asset Management. She is in charge of Private Banking, Multi-management and fund structuring. Prior to joining Longchamp AM, Isabelle worked at Société Générale Bank & Trust (SGBT) at the dealing desk for OTC derivatives. Before SGBT, Isabelle was part of the structured products and FX derivatives sales team at Société Générale Corporate et Investment Banking (SGCIB). Isabelle holds an Engineer degree in financial engineering.

Lorenc Golemi
Head of Financial Engineering and Chief Risk Officer

Lorenc is the Chief Risk Officer at Longchamp AM. Before joining Longchamp AM, Lorenc worked in consultancy and advisory in investment banking and asset management. Previously he worked as Portfolio Manager, Risk Manager and Financial Engineer at UBS AM, CommerzBank and Dresdner Kleinwort Benson. He was in charge of systematic strategies and risk management of volatility and absolute return funds. Lorenc holds an Engineer degree in computer science and a master’s degree in applied mathematics.

Fund Share Class Details

* Reference share classes used to report NAVs, Daily, MTD, YTD and LTD performances.
** Includes a maximum of 0.25% p.a. external operating fees (auditor, custodian, distribution, and lawyers). 

Overview

Longchamp Autocall Fund Strategy

The Longchamp Autocall Fund (the “Fund”) seeks to deliver an annualized performance net of fees higher than that of EONIA capitalized + 6.30% over the recommended investment period of 5 years minimum.

To achieve this goal, the investment manager essentially implements a strategy based on an Autocall portfolio diversified in terms of underlyings, issuers and entry points.

The Fund is structured around two main blocks:

  • A “Core” allocation, the Autocall portfolio
  • A “Satellite” allocation, the Diversification portfolio

The allocations’ weightings target 70% for the Autocall portfolio is 70% and 30% for the Diversification portfolio.

The “Satellite” portfolio of diversification aims to mitigate the effects of significant equity market corrections.

Characteristics of the Strategy:

  • Exposure to European and U.S. equity markets
  • More defensive profile than direct exposure to equity markets
  • Diversification of issuers, entry points and sectors
  • Partial protection of capital
  • Underperformance vs underlying in bull markets

Longchamp Asset Management benefits from its team’s expertise in structured products and has developed a unique expertise around three main blocks:

  • Research: Selection tools of the most interesting underlyings from a quantitative and qualitative point of view
  • Technical: Independence in the valuation of instruments for risk analysis
  • Execution: Best price and selection, and diversification of counterparties

Market Players

Autocall Functioning

Focus on Payoff at Maturity

Investment Strategy and Objective

Performance

Performance as of 27/05/2020

NAVMTDYTDLTD
862.82€3.13%-13.72%-13.72%
Loading

Past performance is not an indicator of future performance. 

Details

Details

Strategy
  • Autocall Fund
Indice de référence
  • The annualized performance net of fees can be compared to:
    • EONIA Capitalized + 5% for the share class C
    • EONIA Capitalized + 6% for the share classes B and D
    • EONIA Capitalized + 6.30% for the share class A
Investment Universe 
  • The Autocall portfolio underlyings are U.S. and European main equity indices or equities from these indices
  • Autocalls can have one or more underlyings
  • The investment management team selects the Autocalls by seeking a balance between the choice of coupons, the capital protection barriers, the coupon protection barriers and the early recall barriers
  • The investment management team may also invest in diversification strategies aiming to provide decorrelation to equity markets
Risk Profile

Risk Profile

The risks to which the holders are exposed are as follows:

  • Risk of loss of capital: the Fund does not benefit from any guarantee or protection; therefore, the capital initially invested may not be returned even if subscribers hold their units for the recommended investment period.
  • Risk related to the loading period of the portfolio (“Ramp-Up”): during the Ramp-Up (which may extend over several months), the Fund may not be fully exposed to the Autocall strategy. Consequently, during this period, the Fund’s performance may be less than the performance objective.
  • Risk related to discretionary management: when managing the Fund, the Investment Manager uses a specific investment process, techniques and risk analysis in its investment decisions, but there is no guarantee that its investments decisions will produce the expected results. In particular, the Investment Manager may not select the types of Autocalls or equity indices, equity sectors as Autocalls reference underlyings that would have delivered a better performance. In addition, the Investment Manager may decide not to fully expose the Fund to the Autocalls strategy for a period whereas full exposure would have delivered a better performance. As a result, the management objective may not be achieved and the investor may experience capital losses.
  • Equity market risk: stock and equity indices prices on the equity market may fluctuate according to investors’ expectations. The Fund may experience significant fluctuations in prices at any time, both upwards and downwards (due in particular to the price evolution of the underlying instruments), which may end up in some cases to the total loss of the amount invested. The drop of equity markets may lead to a drop of the Fund’s net asset value.
  • Implied volatility risk: the Fund is exposed to derivative products whose valuation depends on variables that are not observable directly on the financial markets and that are difficult for the investor to observe. In particular, an increase in the implied volatility of the underlying most often causes a decline in the valuation of derivatives, which results in a fall in the net asset value of the Fund.
  • Interest rate risk: Interest rate risk is the risk of depreciation of rate instruments (long-term and/or short-term) resulting from the variation of interest rates. For example, the price of a fixed-rate bond tends to fall in the event of a rise in interest rates. The Fund is indirectly sensitive to changes in interest rates via its investments in Autocalls: in the event of a significant rise in interest rates, the value of the assets may fall.
  • Currency risk: The fund is exposed to currency risk. It may be exposed to securities with embedded derivatives in USD.
  • Counterparty risk: counterparty risk arises from the Fund’s use of over-the-counter (OTC) held financial instruments and/or temporary securities purchase and sale operations. The Fund is exposed to the risk that the counterparty will not fulfill its performance obligations under the OTC (in particular the Autocalls). The default of the counterparty (or the default of the counterparty to any of its obligations) in the context of these transactions may have a material adverse effect on the Fund’s net asset value.
  • Risks relating to securities financing transactions and risks related to the management of financial guarantees: these transactions and related guarantees may create risks for the Fund, such as:
    • Counterparty risk (as previously described),
    • Legal risk,
    • Risk of conservation,
    • Liquidity risk (i.e. the risk resulting from the difficulty of buying, selling, terminating or valuing a security or a transaction due to a lack of buyers, sellers or counterparties), and where appropriate,
    • Risks related to the reuse of collateral (i.e. mainly the risk that the financial guarantees delivered by the Fund will not be returned to it, for example as a result of the default of the counterparty).
  • Liquidity risk: the counterparties selected in “direct method” (purchase of Securities) and/or “synthetic exposure method” (via swap) are selected on a commitment of liquidity of the instruments. Nevertheless, the fund may remain exposed to a liquidity risk. Financial futures are inherently liquid enough, but under certain circumstances may have a low level of liquidity. In addition, the Fund may be exposed to trading difficulties or the temporary inability to trade certain securities in which the Fund invests or those received as collateral, particularly in the event of a counterparty’s failure to trade and temporary acquisitions and sales of securities and/or total return swaps (TRS).
  • Derivative risk: the Fund uses derivatives that are OTC derivatives for investment and/or hedging purposes. These instruments are volatile and may be subject to various types of risks, including but not limited to market risk, liquidity risk, counterparty risk, legal risk and operational risk. In addition, investments in OTC derivatives may have limited liquidity in the secondary market and it may be difficult to evaluate such a position. For these reasons, there is no guarantee that derivative strategies will achieve the intended purpose.
  • Specific risks related to Autocalls: an Autocall has a variable maturity and can be recalled early on a reminder date. In the event of an early recall of an Autocall or a maturity, the Fund may be subject to reinvestment risk because the Fund may not be able to replace it with an Autocall offering similar characteristics. In the case of Autocalls on several underlyings, the Fund may be exposed to a risk of correlation between the underlyings.
  • Risk related to investment in barrier option derivatives: the Fund is exposed to derivatives whose valuation depends on the level of the underlying on certain dates. The sensitivity of the Fund’s valuation to variations of the underlyings’ prices is increased close to these dates, in particular, at certain market levels that may amplify upwards or downwards the market movement effect of the Funds’ underlyings.
  • Risk of partial participation in the rise of the equity market: between their launch date and maturity, the evolution of Autocall’s value may deviate from that of their underlying stock or index. In particular, the performance of these products since inception is limited upward by the earnings cap mechanism (conditional coupons); therefore, the shareholder may only partially benefit from the increase in underlying shares or equity indices.
Fund Facts

Fund Facts

Legal Structure:French UCITS FCP
Umbrella Fund:N/A
Fund Manager:Longchamp Asset Management SAS
Passporting:Authorized in France
Base Currency:EUR
Liquidity:Daily
Dealing Deadline (Subscription):12:00 pm French Time 5 Business Day prior to the relevant Dealing Day
Dealing Deadline (Redemption):12:00 pm French Time 5 Business Day prior to the relevant Dealing Day
Settlement Date (Subscription):Within 5 Business Day after the relevant Dealing Day
Settlement Date (Redemption):Within 5 Business Day after the relevant Dealing Day
Key Professionals

Key Professionals

David Armstrong
Chief Investment Officer 

David is Chief Investment Officer at Longchamp Asset Management. Previously, he was a Managing Director at Morgan Stanley & Co. International Plc, acting as global head of the investment bank’s Funds and Fund Linked business. In particular, he was in charge of the FundLogic Alternatives Plc (UCITS) Platform and served as President of the French asset management company, FundLogic SAS. Before joining Morgan Stanley, David worked at Société Générale Corporate & Investment Banking in the Equity Derivatives division in Paris before moving to Milan to take the responsibility for the Italian Capital Markets, and then joining Société Générale’s New York office to head the Structured Products division for the Americas. David holds a master’s degree in Business Administration from EDHEC, Lille, France.

Isabelle Mérou
Portfolio Manager

Isabelle is a Portfolio Manager at Longchamp Asset Management. She is in charge of Private Banking, Multi-management and fund structuring. Prior to joining Longchamp AM, Isabelle worked at Société Générale Bank & Trust (SGBT) at the dealing desk for OTC derivatives. Before SGBT, Isabelle was part of the structured products and FX derivatives sales team at Société Générale Corporate et Investment Banking (SGCIB). Isabelle holds an Engineer degree in financial engineering.

Lorenc Golemi
Head of Financial Engineering and Chief Risk Officer

Lorenc is the Chief Risk Officer at Longchamp AM. Before joining Longchamp AM, Lorenc worked in consultancy and advisory in investment banking and asset management. Previously he worked as Portfolio Manager, Risk Manager and Financial Engineer at UBS AM, CommerzBank and Dresdner Kleinwort Benson. He was in charge of systematic strategies and risk management of volatility and absolute return funds. Lorenc holds an Engineer degree in computer science and a master’s degree in applied mathematics.

Shares

Fund Share Class Details

* Reference share classes used to report NAVs, Daily, MTD, YTD and LTD performances.
** Includes a maximum of 0.25% p.a. external operating fees (auditor, custodian, distribution, and lawyers).