Three questions about … Echiquier QME
Echiquier QME was launched in 2015. What is its strategy?
Echiquier QME is a systematic fund exposed to a large number of listed and liquid futures in different asset classes through two complementary strategies. A momentum strategy that aims to capture medium- and long-term trends on all asset classes. The second block of so-called satellite strategies exploits potential sources of yield, such as mean reversion phenomena, for example.
The strategy aims to maximise diversification (markets, strategies, geographic regions and timeframes) and has a maximum annual volatility budget of 10%.
The fund’s strategy was updated in June 2022. What changes were made?
Previously, the fund was only exposed to financial assets. Since 1 June, the fund has also included commodities in its underlying assets. This has resulted in a diversified portfolio of around one hundred listed futures across six categories: Equity indices / Government bonds / Currencies / Energy / Metals / Agricultural products. The portfolio of underlying assets includes around 40% commodity futures.
The exposure to these different asset classes is obtained through a Total Return Swap (TRS), entered into with Societe Generale. The underlying of the TRS is an index based on futures contracts on the asset classes to which the sub-fund wishes to gain exposure.
Echiquier QME has been generating positive returns so far this year in a challenging market environment. Why is investing in this type of strategy relevant?
During previous crises, CTA strategies have generally performed well as they are decorrelated from traditional strategies.
So far this year, Echiquier QME has fulfilled its role on the markets, adopting a bearish position on equity indices and a bullish position on fixed income. Commodities have also seen bullish trends to which the fund has been exposed since June.
Bringing commodities into the fund means that it will benefit from greater diversification and be able to capture the effects of current inflation and future price decreases. Additionally, the commodity markets traditionally show strong trends, which the fund will aim to capture—both the upside and downside—with its proprietary models.
The current environment of monetary policy normalisation is also positive for CTA strategies, enabling stronger directional movements with clearer trends on different asset classes.
The fund’s adaptive functioning means that it fully plays its role of decorrelating from the current environment. We remain convinced that an allocation to this strategy is a particularly effective way to diversify a portfolio.
The fund is primarily exposed to the risk of capital loss, quantitative model risk, derivative risk and commodity risk. For more information on these funds’ features, risks, and fees, please read the regulatory documents – prospectus available in English and French, KIID in your country’s official languages – available on our website, www.lfde.com. The information in this marketing material is in no way to be construed as investment advice, an investment proposal or any encouragement to invest on the financial markets. The information is derived from the best sources in our possession. Investors should note that the investment is made in shares or units of the mutual fund and not in the underlying securities (equities, debt instruments, derivatives, mutual fund) that make up the mutual fund portfolio. Investors should also note that the management company may decide to terminate the promotional agreements for its mutual funds in accordance with Article 93 bis of Directive 2009/65/EC and Article 32 bis of Directive 2011/61/EU. Finally, investors or potential investors are notified that they may obtain a summary of their rights and also file a claim using the procedure stipulated by the management company. This information is available in the country’s official language or in English on the Compliance Information page of the management company’s website www.lfde.com
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Gunther De Backer
