Q1 2019

www.wealthandfinance-news.com 14 Wealth & Finance International - Q1 2019 FD180028 As a French alternative management firm that works singularly in the special situations market, Delta AM finds itself in a rare position indeed – it is a firm with no direct competition. Yet, even in this vacuum, Delta AM impresses with its approach and ability to weather volitivity through experience and honed expertise. As Stanislas explains in more detail: “Delta AM’s original positioning and expertise cover European special situations and distressed mainly through debt securities. Led by two founders, Thibaut Sciard and Carlos Andrade, the company deploys its expertise through internal fund management, mandates for other debt or diversified funds and direct restructuring advising to corporate bodies or investors.” There can be little doubt that, for their clients - mostly institutional investors and peers in need of expertise in distressed situations- Delta AM have become the undisputed authority. Their sole fund, Delta Prime ESSF (European Special Situation Fund), invests in European companies’ debts which are subject to stressors. Due to the nature of these stressors, the company experiences an exaggerated discount, when compared to the company’s intrinsic potential. It is, to put it simply, under-valued. Delta AM aims to take advantage of this discrepancy, in the hopes that the stock market value becomes positively affected by an event either originating inside or outside of the target company. Of course, that all sounds deceivingly simple. In reality, Delta AM’s team cannot be overestimated: there can be no doubt that the firm’s enduring success has been dictated by the skill and experience of the talent at its core. “Our management is based on a fundamental analysis Founded in 2008, Delta Alternative Management is an entrepreneurial asset management company based in Paris. Late last year, Delta AM’s ESSF fund was recognised in Wealth & Finance International Magazine’s annual Fund Awards programme as the Best Event Driven Open-End 5-Year Fund. Following this well-deserved win, we spoke with Stanislas de La Gastine, a Credit Analyst at Delta AM, to find out more about their award- winning fund and unique approach to investment management. A Special Situations Fund That Has Flourished Through Diligent and Expert Management of the issuers, in particular through qualitative filters, in order to identify the opportunities that will be analysed in detail by our analysts’ team – and this according to a rigorous investment process and a bottom up approach.” Of course, the investment industry as a whole is, to some degree at least, at the mercy of large financial institutions. On the subject of the challenges that the industry is currently facing, Stanislas offers some insight into the effect of quantitative easing on the number of special situations arising in the market. “Because of quantitative easing, the number of special situations has been reduced by the influx of liquidity on the markets that artificially masked the underlying risk. The reduced number of opportunities indicates a new low cycle reached in 2017 on special situations. The end of the quantitative easing of the European Central Bank will leave credit pricing again facing real situations of the issuing companies. We have too often seen in recent years bonds whose risk-profit ratio is not reflecting economic reality.” Regardless of these considerable, and very current, challenges, Delta AM has achieved enviable success. According to Stanislas this has been the result of diligent analysis and diversification of assets. “The majority of investors follow benchmarks to build their allocations, which creates price anomalies and relative inefficiencies. Only informed investors with a long-term value approach can benefit from these opportunities. To provide the best possible service to our clients our approach is first unconstrained because we benefit from market inefficiencies in order to create a portfolio offering a de-correlation compared to traditional assets and thus a real diversification. Also rigorous with a disciplined and collegiate investment process to maximize the return / risk ratio. Finally, transparent because we only invest through corporate bonds, without leverage, or derivatives.” Stanislas continues, moving to explain how the firm has adopted a sustainable model of investment following increased investor demand: “Last but not least, over the years, investors also pushed for integration of environmental and social considerations into investment processes and analysis. Delta AM is a PRI signatory since April 2015 after first institutional clients raised demands to considerate ESG factors in our investment process.” In his closing comments, Stanislas discusses the imminent future of Delta AM as they look at launching a SME-focused vehicle: These past couple of years, we have noticed that the share of corporate financing by bond debt, in relation to bank credit and leasing, continues to increase for large companies and midcaps with 70% and 29% respectively. Due to the lack of an adapted offer, this share is not increasing as much as SMEs – at 7% in 2016. As such, Delta AM will launch a dedicated fund to SME lending, called France Economie Réelle, in the coming months.” “We have too often seen in recent years bonds whose risk-profit ratio is not reflecting economic reality.”

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