Press Release – Foresight Analytics Upgrades the Artisan Credit Opportunities Investment Rating to ‘Very Strong’.
Sydney, 9th January 2024
Foresight Analytics has recently completed a rating assessment of the Artisan Credit Opportunities Fund (ACOF), an actively managed long-short credit fund. The investment Rating for ACOF has been upgraded to VERY STRONG from STRONG. Foresight Product Complexity Indicator has been maintained as MORE COMPLEX.
The Artisan Credit Opportunities Fund (the ‘Fund’) is an AUD share class of the Artisan Credit Opportunities Offshore Fund Ltd. (the ‘Underlying Fund’). The Fund is based on a long-short (with a long-bias) investments in sub-investment grade corporate bonds. This is a very high conviction and concentrated investment strategy that’s managed by a highly experienced management team. It invests in both floating-rate notes (FRNs) and fixed-income securities (bonds), predominantly issued by US corporates (has no exposure emerging markets).
The Fund is managed by Artisan Partners Limited Partnership (Artisan Partners), which seeks to generate equity-like returns with lower than equity volatility over the full market cycle. Since the inception of the Underlying Fund in June 2017, it has successfully delivered on this objective. Artisan Partners is an investment adviser registered in the US. Artisan Partners credit team, under the leadership of highly regarded Bryan Krug, manages assets in excess of US$9 billion across high-income, floating rate, and credit opportunities strategies. The firm has carved out a strong competitive advantage in selecting and managing credit assets across the full debt capital structure and generating superior risk adjusted returns for clients.
The ACOF was set-up in November 2022 by well-established funds management firm, Copia Investment Partners (Copia) with offices in Melbourne, Sydney, and Brisbane. Copia was established in 2000 and is an independently owned partner for specialist investment firms across different asset classes. Copia has partnered with Artisan to distribute the ACOF.
While the Fund is based on a long-short strategy, it has a significant bias to ‘long’ positions. Typical gross exposure (combination of absolute long and short exposures) ranges from 100% to 175%. Typical net exposure (difference between long and short exposures) ranges from 80% to 130%. The portfolio is very much weighted to B-rated and CCC-rated securities.
An investment rating of VERY STRONG indicates that Foresight analysts’ have a very strong conviction that the product and its manager can deliver a risk-adjusted return in line with its investment objectives. The Australian unit trust is set-up and managed by well-resourced Copia and the underlying investments are managed by highly capable team at Artisan Partners.
A complexity rating of MORE COMPLEX has been maintained for the fund, reflecting a highly unconstraint strategy that can generate returns through a wide variety of non-standard investment strategies including financial leverage, derivatives, and short selling techniques.
About Foresight Analytics’ Operational Due Diligence Rating (ODD Rating)
An Operational Due Diligence Rating assesses the capacity of an operating entity, special-purpose vehicle, or asset (collectively “operating party”) to effectively undertake its defined role of managing the operational risks relating to a pool of financial or physical assets. The ability of an operating party to carry out its role, be it in a superior, adequate, or poor manner, ultimately will have a bearing on the performance of the pool of assets. The overall ODD Ratings assigned by Foresight Analytics is underpinned by 7 risk factors – Ownership, Management talent, Governance, Risk & Compliance, Asset & Data security, Systems & Technology and Financial agility.
The assessment covers operational responsibilities and oversight undertaken for a pool of assets retained by the owner, or alternatively a pool of assets that underlie a debt issue or managed fund. The assessment addresses how much the operating party enhances or potentially detracts from the ability of the asset pool to pay interest and principal on a specific security as and when due, or the fund’s ability to distribute income according to the Product Disclosure Statement (PDS). It should be noted that operational risks generally exist in addition to credit, market, and liquidity risks.
Foresight Analytics Operational Due Diligence Rating (ODD Rating) Scale & Definitions
About Foresight Analytics’ Investment Due Diligence Rating (IDD Rating)
The objective of Foresight Analytics’ Investment Due Diligence Rating (IDD Rating) is to identify the best funds and opportunities for future investment. We assess the fund’s historical risk-adjusted performance – compared to its peers – to form a holistic view of the manager’s ability to deliver future returns. The IDD rating indicates the quality of the investment option within the context of a diversified portfolio and full investment cycle.
Foresight’s analysts use a 5-point scale to determine how the fund will perform against a range of risk factors.
- SUPERIOR indicates the highest level of confidence that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is highly suitable for inclusion on APLs.
- VERY STRONG indicates a very strong conviction that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is suitable for inclusion on most APLs.
- STRONG indicates a strong likelihood that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is suitable for inclusion on most APLs.
- COMPETENT indicates the fund may deliver a risk-adjusted return in line with its relevant benchmark and that it may be suitable for APLs.
- WEAK indicates the fund is unlikely to deliver a risk-adjusted return in line with its investment objective and that it is not suitable for most APLs.
A ‘Hold’ designation is applied to a fund’s rating if a material change impacts the fund manager, and we need to review the rating. A ‘Sell’ designation indicates the Foresight Investment Ratings Committee considers risk factors to be elevated enough that maintaining an investment in the fund as part of their diversified portfolio is questionable.
Foresight Analytics Foresight Complexity Indicator
A Foresight Complexity Indicator (FCI) highlights the complexity of an investment product based on a range of indicators. These typically include its terms and conditions, performance-based fees, liquidity structure, financial leverage, use of derivatives, rare and niche asset class/opportunity set, currency exposure and the level of transparency offered for investors. Foresight believes these factors can disproportionately affect risk–adjusted return outcomes for investors even if a manager is very skilled. Investors can use FCI as a guide to portfolio position sizing within a diversified portfolio context.
Media Contact – Foresight Analytics
Rodney Lay, Analyst
Suite 208, 33 Lexington Drive, Bella Vista, 2153, NSW
Telephone: 02 8883 1369
About Foresight Analytics
Foresight Analytics, an independent Sydney based firm, provides investment diligence, data analytics, and investment advisory solutions to leading investment management companies, superannuation funds and wealth groups across the Asia Pacific. Foresight’s innovative, evidence-based approach blends both human and forensic insights to provide a range of analytical, predictive and market intelligence solutions to investors. Foresight Analytics was founded in 2015 by Jay Kumar, a former executive of Morningstar, Optimix Investment Management, ANZ Wealth & Private Bank and the Reserve Bank of Fiji.
Foresight’s fiduciary solutions include Diligence Services (Investment, Operational, ESG & Risk Diligence), Data Analytics and Asset Consulting. Foresight’s fund strategy solutions include Data Analytics for asset managers, Fund Strategy Benchmarking Solutions and Strategic Research.