BNP Paribas revamps quant fund to protect against risk

Europe Target Premium fund

BNP Paribas has revamped the firm’s THEAM Quant fund to better mitigate risk in poor market scenarios.

The THEAM Quant - Europe Target Premium fund was launched in 2019, aiming to generate income by implementing a dynamic option strategy (or put-writing) on the Euro Stoxx 50 index. However, BNPP said the fund was at risk of suffering "significant drawdowns in certain abrupt equity downturns". The new strategy aims to mitigate the worst case scenario, such as the market crash at the beginning of the pandemic, while still keeping the fund's upside during better market conditions. This has been achieved with a new risk reduction approach, using a partial delta hedging mechanism within ...