BNP Paribas Investment Partners has announced that it is resuming calculation of the net asset values of three funds whose suspension on August 6 was a critical point in the meltdown of the US sub-prime mortgage sector and the seizing-up of credit mechanisms in the first 10 days of the month.
The valuation of Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia, which are partially invested in AAA and AA-rated American sub-prime securities, was temporarily suspended, BNP Paribas says, following the sudden evaporation from August 6 of any trading activity in certain sectors of the US market.
The investment firm says: 'This was done in compliance with the prevailing regulations in order to protect all investors and ensure that they received equal treatment during these exceptional circumstances.' At the time it promised to resume NAV calculation as well as subscriptions and redemptions as soon as market conditions permitted.
Since the decision was announced, and faced with the continuing difficulty in obtaining market prices on certain sectors, BNP Paribas Investment Partners says it has developed a pricing mechanism that will allow subscriptions and redemptions to resume.
The firm says this mechanism combines several valuation methods, in particular using pertinent market indices when they are available and taking into account illiquidity factors by issuer category.
'Given this new mechanism and the prevailing market environment for these financial instruments, BNP Paribas Investment Partners considers that conditions are in place to resume the net asset value calculation as well as subscriptions and redemptions for the three funds as of 28 August at 13.00 (Paris time) for BNP Paribas ABS Euribor and BNP Paribas ABS Eonia, and as of 30 August at 15.00 (Luxembourg time) for Parvest Dynamic ABS.'
Based on August 7 net asset values, the firm says, the drop in NAV for BNP Paribas ABS Euribor should range between 2 and 3 per cent, for BNP Paribas ABS Eonia between 2.5 and 3.5 per cent, and for Parvest Dynamic ABS between 4 and 5 per cent, although it warns that estimates could still fluctuate according to market conditions.
BNP Paribas Investment Partners adds: 'We would like to emphasise once again that these three funds are on average over 90 per cent invested in securities rated AAA and AA which have not been subject to downgrading or defaults during recent months, and their valuations are currently depressed due to the illiquidity of the market.
'The prevailing context presents an opportunity for new investors to benefit from discounted asset prices by subscribing to these funds and for current shareholders to remain invested.'
BNP Paribas Investment Partners is a multi-specialist asset manager with around 2,000 professionals servicing clients in more than 69 countries and assets of EUR356bn under management or advisory at the end of June, nearly half of which is managed for institutional clients.