Melbourne, 28 September 2017 – Australia Ratings has assigned a ‘STRONG’ investment rating to Levitas Capital’s Absolute Return VIX (ARVIX) Fund ("the Fund").
A STRONG investment rating indicates a strong conviction that the fund can deliver a risk adjusted return in line with manager’s objective. This is based on an investment rating scale used by Australia Ratings to indicate how well we believe a fund will perform against a range of risks.
The ARVIX Fund, managed by Levitas Capital, is a quantitative, relative value, volatility fund targeting absolute returns throughout the market cycle. These returns are expected to have a very low or at times negative correlation to mainstream equity markets.
Australia Ratings’ analyst Maggie Callinan said “The ARVIX fund uses the highly liquid Chicago Board Option Exchange (CBOE) Volatility index (VIX) options and futures markets to capture the positive risk premium available from structurally expensive equity implied volatility markets. The objective for the capture of the risk premium is to produce high single digit returns in periods of low and average market volatility.” Ms Callinan also noted “the ARVIX fund is expected to produce high single digit annualised returns in periods of low volatility and 20-30% annualised returns during periods of average and high volatility.”
While the rating primarily reflects the expected consistency of the fund’s performance and on the fund manager’s ability to produce superior performance within its peer group in the near term, the rating has been influenced by the early stage of the ARVIX fund. That is, there is a short (less than one year) performance history and at this stage there is relatively low FUM based revenue.
Australia Ratings has also assigned its Product Complexity Indicator of ‘ORANGE’ indicating the fund as a More Complex financial product. The fund generates returns through a variety of non-standard investment strategies. Products of this type are often known as Hedge Funds.
The strategies used include model-driven investment selection, return generation using derivatives, and a performance profile that does not track mainstream markets. This type of fund is typically used to diversify portfolio risk or to provide superior returns to the underlying market.
A full rating report is available from www.australiaratings.com/.
FOR MORE INFORMATION CONTACT:
Maggie Callinan, Director firstname.lastname@example.org 03 8080 6684
About Australia Ratings’ Investment Rating
Our investment rating reflects Australia Ratings’ current opinion of a fund’s or an investment’s ability to achieve its stated investment objectives in the near term. The rating expresses a view on the expected consistency of the fund’s or investment’s performance within its peer or style group and on the fund manager’s ability to produce superior performance amongst its peers in the near term with due regard to the medium-term consensus view of the asset class to which the product is benchmarked.
A five-point scale is used to differentiate our opinion on how well we believe a fund will perform against a range of risks.
About the Product Complexity Indicator
Our proprietary colour-coded product complexity indicator (PCI) highlights the complexity level of an investment by its terms and conditions’ structure and transparency that may affect an investor’s return.
ABOUT AUSTRALIA RATINGS
Australia Ratings is a local, independent rating agency that provides timely and credible ratings information and research to the broader investment community. As an ASIC-licensed rating agency, we provide general advice by issuing credit ratings on debt securities and companies; and fund ratings on Australian managed funds. We are Australia’s only agency that holds a retail Australian Financial Services Licence (AFSL). This enables both retail and wholesale investors to use our credit ratings to help them gauge credit risk and complexity of financial products sold in the Australian market.
Rating opinions of Australia Ratings are determined by its analytical team in accordance with its rating methodology. The Board of Australia Ratings whose members include Jarrod Brown, Chris Dalton and Mike Dontschuk oversee the application of Australia ratings rating methodology and the integrity of the rating process.