Dual Performance Engines in Collaboration

In the tumultuous world of finance, one investment firm has stood out for its ability to navigate turbulent waters: Candriam. The Brussels-based asset manager has been successfully employing an equity market-neutral approach for 15 years, and its strategies have proven effective, even in the most challenging market phases.

Candriam's investment process is unique. It involves building arbitrage positions based on relative value strategies, exploiting price differences between similar instruments. This approach allows the firm to adjust the size of their positions and hedge them efficiently in the current market.

The firm uses quantitative tools to identify investment opportunities, which are independent of news flow and market volatility. These opportunities are typically found in financial institutions, industrial companies, and consumer goods firms, though specific company names are not publicly disclosed.

Candriam's investment process involves two complementary arbitrage strategies. These strategies involve buying and selling stocks in major global indices like S&P 500, Euro Stoxx, and DAX. The independence of this approach from transactions popular among fund managers using arbitrage strategies is a key strength.

This approach paid off in 2020, with Candriam's equity market-neutral portfolio experiencing a 17.2% increase (after fees, from 31.12.2019 to 31.12.2020). In contrast, many long-short equity funds had a disappointing performance in the same period.

The recent market developments had little impact on Candriam. The firm's approach aims to protect portfolios from directional market trends. This was evident during the mid-March 2020 period when many fund managers significantly reduced their leverage, triggering a domino effect that caused other funds to hit stop-loss limits and start selling positions.

In the current situation, Candriam continues to stick to its proven process, identifying opportunities and entering positions when the risk-reward ratio is attractive. As a result, the firm's equity market-neutral approach has continued to perform well, with a 5.1% increase since the beginning of the year (after fees, from 31.12.2020 to 31.03.2021).

Fewer arbitrageurs are positioning themselves on the same positions as Candriam, providing more room to maneuver. This trend is likely to continue, making the current environment favourable for Candriam, allowing for good value increases independent of the development of equity and bond markets.

In conclusion, Candriam's equity market-neutral approach, which has been honed over 15 years, has proven its effectiveness in turbulent market phases. The firm's ability to identify and exploit price differences between similar instruments, combined with its independent approach to investment opportunities, has allowed it to thrive in a volatile market.