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May 30 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Yapi Kredi Invest's Koc Group Affiliates Equity Fund, a fund managed by Yapi Kredi Portfoy, a 'Strong' Fund Quality Rating.
The rating reflects the fund's disciplined approach to its selection and monitoring of asset allocation, which follows a similar team based approach to other equity funds managed by Yapi Kredi Portfoy. Decisions concerning market exposure are driven by a fundamental, macroeconomic assessment, supplemented by technical and sentiment analysis, to take account of volatility in the Turkish equity market. The fund focuses on the long term growth opportunities of the index constituents relative to each other and their market valuation.
Decision making is concentrated in a formal investment committee which convenes on a weekly basis and combines the manager's investment expertise across asset classes. Defined allocation bands and active stock selection are key drivers in the portfolio construction process. The lead PM enjoys controlled freedom to operate within the given guidelines. The fund operates a distinct stop loss discipline under supervision of the independent risk department beyond tracking error and value at risk limits.
The fund invests mostly in listed affiliates of Koc Group, a large Turkish industrial conglomerate. Equity exposure may vary between 75% and 100%. The fund manager's principal shareholder is part of Koc Group. Possible conflicts of interest are regularly monitored by the regulator and internal and external audits and none have occurred in the fund's 15 year history. Disclosure rules of the Istanbul Stock Exchange for listed companies apply to all companies the fund may invest in.
These 13 companies are equally weighted in the Reuters Koc companies' index at end April 2013, the fund's applicable benchmark. As a result the fund has a limited investment universe and a distinctly different sector profile from other domestic equity indices (ISE 100/ISE30) with a notably higher exposure of industrials versus financials. This characteristic is a key driver of its absolute performance versus practically all of its peers. Active positioning on the upside is also limited by the regulatory cap of 10% exposure to any individual stock.
The fund has substantially outperformed the Lipper category "Global Equity Turkey" on both a three and five year basis. While the distinct sector bias of the index makes direct peer comparisons difficult as stated above, the fund beat its benchmark on a net basis in three out of the past five years (consistently on a gross basis).
The current lead portfolio manager (PM) is the head of the equity team and has managed the fund since June 2010 when he internally took on his role. He has more than 20 years of investment management and research experience. The lead PM is assisted by an experienced co-manager with an international career background who joined the firm in 2007. The overall investment process has been broadly stable since inception, but the fund changed its benchmark on 21 January 2012 giving a higher exposure to the equity index component (from 85% to 90%). The Yapi Kredi Invest's Koc Group Affiliates Equity Fund is a Turkish domiciled fund, with TRY90.9m of assets, as of end-April 2013.
Yapi Kredi Portfoy (Asset Manager Rating 'Highest Standards(tur)') is one of Turkey's market leader in the asset management industry with TRY10.2bn assets under management (AuM) as of end-March 2013. The company has a long track record of managing domestic equities. In line with a relatively small share of equity funds in the industry, the equity team currently manage a total of around TRY869m.
Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company. Fitch's Fund Quality Ratings offer an independent, forward-looking assessment of a fund's key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks. The ratings focus on the fund manager's investment process, key fund performance drivers, risk management, and the quality of the fund's operational infrastructure.
Fund quality ratings may be sensitive to material changes in the investment or operational processes or market risk profiles of the fund. A material adverse deviation from Fitch's guidelines for any key rating driver could cause Fitch to downgrade the ratings. For example, notable structural deterioration in the fund's performance or departure of key investment professionals may cause a lower rating. More specifically, evidence of a conflict of interest with respect to Koc group companies or failure to operate at arm's length principle may cause Fitch to lower the rating. For additional information about Fitch's fund quality ratings guidelines, please review the criteria referenced below.
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