Home » Eurizon Flexible Profile Defense Fund: Opinions

Eurizon Flexible Profile Defense Fund: Opinions

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Eurizon Flexible Profile Defense Fund: Opinions

Independent Financial Advisor and Co-Founder of Affari Miei

February 23, 2024

In this guide I analyze the Eurizon Flexible Defense Profile fund (ISIN: IT0005285157) from the point of view of operation, management policy, risks, costs, advantages and disadvantages.

The fund belongs to Eurizon Capitala note Asset management company belonging to the Group Intesa Sanpaolo. It controls numerous mutual investment funds capable of satisfying the needs of a very wide range of users.

I have reviewed several SGR products to help my readers make a wise choice, and today I will share with you some reflections on the category of “flexible” funds. I will also give you some tips to understand if this investment is consistent with your strategy: in fact at the end of the article you will find mine opinions about.

Enjoy the reading.

This article talks about:

Two words about Eurizon

Eurizon Capital is the arm of Intesa Sanpaolo that deals exclusively with asset management, i.e. the management of investment products. Eurizon deals both with managing individual funds and more complete managed savings products, such as capital accumulation plans (PAC) and capital investment plans (PIC).

With over €300 billion under management and more than 30 years of history behind it, it is at the same time one of the largest and most historic asset management companies in Italy. The main office is located in Milan, but the company’s registered office is in Luxembourg.

Characteristics of the Eurizon Flexible Defense Profile fund

Let’s start immediately by describing the main characteristics of the fund Eurizon Flexible Defense Profile. Based on what is stated in the KID (Key Investor Information Document)it is an actively managed fund, belonging to the category of flexible funds.

What are? THE flexible funds they are distinguished from other actively managed funds by the fact that the manager carries out a strategic asset allocation without adopting a benchmark as a reference – that is, without using a pre-established portfolio of securities as a “guide”.

The management objective is “limited growth of the invested capital, optimizing the portfolio’s return in compliance with a risk budget”.

It means, in other words, that the fund mostly uses low risk/return instruments, but can make more dynamic choices to increase profit opportunities, with the constraint of not increasing risk exposure beyond the limits established by the fund regulations.

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What he invests in

The fund mainly invests in financial instruments of a bond and/or monetary nature, in investments in financial instruments of an equity nature up to 15% of the total assets, while the financial instruments are mainly denominated in euros and US dollars.

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Bonds and monetary instruments are issued by states, supranational bodies/agencies and companies. Investment in bonds/monetary instruments with a credit rating below investment grade or without a rating (and therefore significantly exposed to credit risk) up to 20% of assets. The shares are issued mainly by medium/large capitalization companies.

The benchmark

The “benchmark” of an investment fund is a stock market index that determines many aspects of the fund’s strategy. Managers can only buy and sell instruments that are part of the reference index, attempting to obtain a better performance compared to that obtained from the benchmark.

Being a flexible fund, the fund does not follow any reference index.

Portfolio composition in detail

Let’s analyze the wallet. It is mainly oriented towards bonds and/or monetary instruments issued by States, supranational bodies and companies that do not necessarily have a high creditworthiness.

However, equity financial instruments are included in the basket, up to 15% of total assets. Furthermore, the fund also invests significantly in UCITS and/or derivatives.

We learn that management does not set too rigid limits in the choice of financial instruments, in the selection of issuers, geographical areas and currencies. The investment is “directed to markets which from time to time offer interesting prospects in terms of returns”.

Given the flexible policy and the lack of a benchmark, it becomes difficult for the average investor to understand the manager’s choices and predict which direction the investment will take.

How much risk is covered

Flexible funds are always accompanied by a risk index called VaR (Value at Risk), which measures the maximum potential loss that the portfolio can suffer over a time horizon of one month.

In the absence of other references, the VaR is used to evaluate the risk exposure of the instruments in the basket, i.e. whether the portfolio is consistent with what is declared by the synthetic indicator – that numerical scale that goes from 1 to 7, which you find illustrated in KID and which classifies the fund based on its risk/return profile.

Thanks to the synthetic indicator we know that the fund has a medium-low profile (level 3), and therefore the capital cannot be exposed to greater risks and volatility. However, it is not easy to understand whether these limits are actually respected because VaR is much less precise than they would have us believe.

Subscription, exit and use of proceeds methods

Eurizon Flexible Defense Profile it is an open fund, therefore investors can subscribe to shares at any time and, with the same freedom, can request reimbursement from the SGR and exit the investment.

You enter the fund with a minimum payment of 500 euros, then subscribe to a certain amount of shares corresponding to the amount invested. Both the single payment and the PAC, the capital accumulation plan, are permitted.

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Lastly: the income distribution policy is accumulation, which means that the profits accrued each year are not distributed but reinvested in the fund itself.

What costs do you have to bear directly and indirectly

Let’s finally analyze the cost statement that we need to evaluate the real convenience of the investment. In fact, expenses eat up part of your capital and potential return!

The expenses that you have to pay for the investment are divided into:

Direct entry charges (one-off), maximum 1.00%; Repayment costs for exiting the fund, not foreseen; Indirect ongoing charges taken from the fund each year, amounting to 1.19%, of which 1.05% is to pay the manager; Performance fee, variable and calculated annually.

In case the cost issue is not clear to you, I advise you to download our free report in which we explain how the costs of the funds are costing Italians billions of euros without the latter realizing the real importance of the topic.

Historical Returns

The past performances they can be useful for understanding the effectiveness of management, keeping in mind that they are not indicative of future ones.

Inside the KID we find the graphic with the realized returns, which I attach here:

Apparently, the fund did not always have brilliant performances, sometimes it went into losses. In some cases the flexible policy allowed to achieve satisfactory results (considering the moderate risk level), but other times it was not so effective.

Unfortunately, it becomes difficult for the average investor to understand whether the choices made by the manager were truly advantageous, given that there is no benchmark to make the comparison.

It would be appropriate to combine the returns of this fund with those of another basket, which has a similar objective and presents the same level of risk.

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Final opinions of Affari Miei

Before concluding the review I want to share some with you reflections which will help you understand if this investment is consistent with your objectives and your risk/return profile.

Eurizon Flexible Defense Profile requires that you, as a participant in the fund, delegate the responsibility for investing your capital to the manager. You give him complete freedom in choosing markets and instruments. The only sticking point is the risk profile.

Practically the manager it can do what it wants with the justification that it must diversify risk and seize the most interesting opportunities offered by the market. This principle is typical of managed savings products – the saver tends to decide little or nothing.

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But if with a conventional fund it is already complex to evaluate, from time to time, the direction that the investment is taking, with a flexible fund it becomes practically impossible to maintain a margin of control.

One of the risks you run is that of finding yourself, at a certain point, with an investment that has changed compared to the beginning, and which no longer reflects your expectations. There is also “manager risk”, i.e. the possibility that the investment policy turns out to be ineffective due to the manager’s poor choices.

The biggest mistake, however, is the one you can make by subscribing to a complex instrument without knowing what you are up against. So think carefully about choosing this fund.

Here on Affari Miei we often prefer to invest in ETF when it comes to funds, since they offer drastically lower costs and at the same time they are products that you can purchase independently without conflicts of interest. They are listed on the stock exchange and have a passive management, that is, they don’t try to beat an index but simply copy it. This means that you don’t have to pay sky-high fees to managers and that performances are almost always better.

If you think you want to better understand the critical issues of mutual funds, I recommend our free report in which we explain how inefficient funds are a return-devouring system for investors.

If, however, you are intrigued by Affari Miei and do not yet know our approach to personal finance and investments, you can start here.

Why it is important to define a strategy

Before choosing the instruments to put in your portfolio, it would be better to define an investment strategy and, possibly, increase your financial education.

An informed investor, and aware of his objectives, is unlikely to purchase ineffective and harmful instruments.

On Affari Miei you will find gods guided tours to invest, suitable for the different stages of saving and life:

I wish you good investments and I hope that, first of all, you will invest in your education.

See you soon!

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