Emmanuel Terraz: Since the launch, the 9th of September 2003
e-fundresearch.com: What is the current size of the fund?
Emmanuel Terraz: 1 456 million USD (mid-September 2013)
e-fundresearch.com: Do you also manage other funds or mandates?
Emmanuel Terraz: No.
e-fundresearch.com: How long have you been in the business as a fund manager?
Emmanuel Terraz: Since 2003.
e-fundresearch.com: What are the main steps in your investment process and in which area is your competitive edge to add value to investors?
Emmanuel Terraz: The investment process is equity market-neutral and the strategies implemented in the fund are discretionary statistical arbitrage. To implement these strategies, we use quantitative analyses that are refined by qualitative analyses. Any statistical arbitrage strategy on equities, presenting a risk/yield ratio in line with the fund's objective, is eligible within our investment universe, such as:
- Index event arbitrage (our main strategy) based on a rigorous analysis of all equity indices rebalancings
- Closed-end fund arbitrage based on an analysis of the differences between the exchange price of the units of closed-end funds and the value of the underlying assets (Net Asset Value).
- Corporate action arbitrage (identify the equities whose prices will be impacted by an operation, such as a spinoff for example).
- Relative value arbitrage (the relative value arbitrage between two shares is based on the analysis of the ratio between the prices of two stocks or baskets of comparable stocks)
Within this framework, the portfolio construction is based on a combination of quantitative and qualitative approach.
The quantitative analysis allows optimizing the entry and exit points based on a statistical analysis of past events. The qualitative analysis complements the quantitative approach through an analysis of external corporate facts and events (company’s business model, , results released, etc.) or the impact of other arbitrageurs. Fundamental analysis is also used to determine a reasonable valuation for a given stock so as to try to avoid an exogenous event whose impact would be much greater than the expected gain of the arbitrage.
Dexia Index Arbitrage is unique for several reasons: Long experience, a discretionary statistical arbitrage process comprising a unique mix of equity market neutral strategies, a rigorous investment process that combines a quantitative and qualitative approach to optimise the level of the positions and a disciplined risk control.
Finally, we can add that Dexia Index Arbitrage offers a niche strategy hardly implemented by other asset managers.
e-fundresearch.com: Which benchmark is most relevant and how should investors compare the fund vs. benchmarks or peer groups?
Emmanuel Terraz: Dexia Index Arbitrage is a low-volatility UCITS IV fund offering a daily liquidity. Its target is to achieve an absolute performance above Eonia, on a 3-year investment horizon, with a volatility level below 5%.
Since its inception in 2003, Dexia Index Arbitrage has outperformed the Eonia every year, regardless of market conditions, with a volatility below 1.5%.
e-fundresearch.com: Which performance did you achieve for the fund YTD and over the past five calendar years in absolute terms and relative to relevant benchmark or other reference indices?
e-fundresearch.com: What motivates you in your job?
Emmanuel Terraz: It is fun, it is profitable and it is what I am good at !
e-fundresearch.com: Which other profession would you have considered apart from becoming a fund manager?
Emmanuel Terraz: None, I don’t see any other profession where I would have a better fit !
e-fundresearch.com: Thank you!