BNP Paribas revamps 'target premium' THEAM Quant fund

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BNP Paribas has launched a revamped version of the THEAM Quant - Europe Target Premium fund (the fund) for continental European investors across the UK, Switzerland, Germany, Italy, France, Spain, and Benelux.

Launched in 2019, the fund originally sought to generate income in bullish, moderately bearish, and certain volatile markets by implementing a dynamic option strategy (put-writing) on the EURO STOXX 50 Index. The strategy could, however, suffer significant drawdowns in certain abrupt equity downturns, depending on how these scenarios develop.
The revamped strategy specifically aims at mitigating worst-case scenarios such as the Covid-related market gap, while still keeping the strategy’s attractiveness during positive scenarios. It has been enhanced with a risk reduction approach, implemented via a partial delta hedging mechanism within the put-writing strategy. This aims to partially reduce the directional exposure to market when the risk of option exercise is high, as well as to mitigate the losses in gap market scenarios while maintaining its overall income-like profile. 

Over the full year in 2022, the fund has returned +11.08%, while the EURO STOXX 50 was down -9.49%. Since the market bottom in March 2020, the fund has returned +95.1% as of 25th January. The newly introduced partial hedging mechanism replaces the previous risk reduction technique employed, which was based on longer maturity options.

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