Groupama AM, Axiom target €800m AUM for subordinated debt fund

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French investment firms Groupama Asset Management and Axiom Alternative Investments have reported assets under management of €364m as of 11 May 2018 for their Groupama Axiom Legacy 21 fund, launched at the end of May 2017.

The fund, whose management is delegated by Groupama AM to Axiom AI, focuses on subordinated “legacy” debt, which issuers should call when they lose their regulatory capital status (by the end of 2021 for banks and by the end of 2026 for insurance companies).

In an around €150bn European financial debt market, the fund seeks to achieve an annualised return equal to or higher than the three-month Euribor +3%, over a four-year investment horizon.

It plays the transition of the European banking sector towards a new cycle (change in economic models, favorable interest rate environment for financial institutions) and the implementation of the new Basel III and Solvency 2 regulations.

The fund invests in four distinct debt pockets: discounted securities, “fixed-to-fixed” securities, “long calls” securities, securities issued by financial institutions whose credit is improving and with a potential in valuation.

Since inception on 31 May 2017, the Groupama Axiom Legacy 21 fund returned 3.55% as of 11 May 2018.

David Benamou, chief investment officer at Axiom AI, said that the market depth of the Legacy debt segment was quite substantial, adding that under current condition, the fund could reach €800m in AUM eventually while management capabilities and investment agility of the boutique would be preserved.

Thierry Goudin, head of Business Development at Groupama AM,added: “We are satisfied with the successful launch of the fund, both in terms of its performance in an uncertain market environment and in terms of progress of the assets under management. Professional investors are becoming increasingly more receptive to this type of thematic solution,whose specific characteristics offer attractive risk-adjusted returns.”

Established in 2009, Axiom AI manages some €1.3bn of assets through strategies invested in financial instruments issued by European financial institutions.