Amundi has extended its range of volatility funds with the launch of Amundi Funds Absolute Volatility Arbitrage Plus.
This Ucits IV-compliant sub-fund of the Luxembourg SICAV Amundi Funds offers investors an original solution, providing diversification and decorrelation compared to other asset classes.
Amundi Funds Absolute Volatility Arbitrage Plus aims to generate an annual performance of over EONIA capitalised four per cent, over a minimum investment horizon of three years and with a maximum risk budget of VaR eight per cent.
Volatility, seen by Amundi as an asset class in its own right, enables performance generation by tapping opportunities arising from market volatility. Volatility arbitrage strategies consist in arbitraging volatility gaps, particularly at times of market uncertainty.
Eric Hermitte, the fund manager of Amundi Funds Absolute Volatility Arbitrage Plus, says: “Within financial markets, flaws and valuation gaps can be observed and these imperfections form the core of arbitrage strategies. We have a track record of more than ten years in this type of strategy and strive, via the Amundi Funds Absolute Volatility Arbitrage Plus sub-fund, to generate performance by making the most of these market inefficiencies.”
In order to meet its performance target, the investment team applies different volatility arbitrage strategies in distinct asset classes:
- Equity volatility arbitrage: this strategy arbitrages volatility gaps between two stocks in the same sector or between a basket of equities and an index
- Equity index volatility arbitrage: this strategy taps expected convergences/divergences in volatility between different equity indices and/or options of different maturities within a single index
- Interest rate volatility arbitrage: this strategy taps expected convergences/divergences in volatility between two geographic regions or between two different maturities in a single region
- Convertible bond volatility arbitrage: this strategy capitalises on valuation gaps between the implied volatility of the option component of a convertible bond on the one hand, and the historical or implied volatility, i.e. in the options market, of the underlying equity on the other hand
Hermitte adds: “We analyse these four distinct markets in order to diversify and limit the risks taken within the sub-fund.”