Zest Derivatives Allocation Fund

Investment rationale

ZEST Derivatives Allocation Fund is a diversified absolute-return strategy that aims to seek a consistent return while placing emphasis on capital preservation over the medium to long term. The R1 share class has a risk indicator of 2 out of 7 and a recommended holding period of 1 year. The sub-fund is suitable for investors who want to diversify and decorrelate their investments and improve the risk/return ratio of their portfolio. Its role in a portfolio is therefore closer to a diversifying or satellite allocation than a pure directional core equity or bond holding. What makes it distinct is its extensive use of options and derivatives to reduce overall portfolio risk, combined with flexible allocation across debt instruments, equities, money market instruments and structured products.

2026-04-01

How the strategy works

The objective is to seek a consistent, absolute return while placing emphasis on preservation of capital in the medium to long term; derivatives are used mostly to reduce risk and smooth volatility through options strategies for yield enhancement. The sub-fund mainly invests in derivatives, debt instruments including bonds and convertible bonds, money market instruments or similar products, and equity and equity-related securities including ADR/GDR. Direct equities and equity-related securities, including UCITS/UCI investing principally in equities, are capped at 65% of net assets; equity derivatives are excluded from this calculation; debt instruments rated below Ba2/BB or equivalent are capped at 20%; contingent convertible bonds at 20%; non-rated bonds at 10%; ADRs/EDRs/IDRs/GDRs from emerging or frontier issuers at 20%; UCITS/UCI exposure at 10%; structured products at 20%; indirect ABS/MBS exposure at 20%; and emerging markets exposure at 20%. The fund is actively managed without reference to a benchmark, may use all types of financial derivative instruments on regulated markets and OTC with regulated counterparties, largely favouring futures and options in normal markets, will not use total return swaps, and follows a cumulative distribution policy with no planned dividends; the recommended holding period is 1 year.

2026-04-01

Investment philosophy

• The portfolio is built across multiple eligible asset classes: derivatives, debt instruments including bonds and convertible bonds, money market instruments or similar products, and equity and equity-related securities including ADR/GDR.

• The strategy is based on risk spreading and makes extensive use of options and derivatives to reduce overall portfolio risk; for hedging and investment purposes it may use warrants, futures, options, contracts for difference, credit default swaps and forwards on eligible underlyings.

• Normal market implementation largely favours futures and options, and the investment manager’s stated goal is to smooth volatility through options strategies used for yield enhancement.

• Credit exposure is controlled by portfolio limits: no more than 20% in debt instruments issued by issuers rated below Ba2/BB or equivalent, 20% in contingent convertible bonds, 10% in non-rated bonds, and distressed or defaulted exposure only up to 10% if created by subsequent downgrade.

• Portfolio construction is also constrained by exposure limits, including 65% maximum in direct equities and equity-related securities plus UCITS/UCI investing principally in equities, excluding equity derivatives from this limit, 20% maximum in ADR/EDR/IDR/GDR exposure to emerging or frontier issuers, 10% in UCITS/UCI, 20% in structured products, 20% in emerging markets, no direct ABS/MBS, and no total return swaps.

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Distinctive features

A distinguishing feature is the explicit use of derivatives as a central portfolio tool rather than as a marginal overlay, with the stated aim of reducing portfolio risk and smoothing volatility through options strategies for yield enhancement. The strategy is broad in opportunity set, combining debt instruments, equities, money market instruments, derivatives and structured products within clearly stated exposure limits. Emerging-markets exposure is capped at 20%, and the fund excludes direct ABS/MBS as well as total return swaps. For the R1 retail class, the fund itself charges no entry or exit fee, and the share class accumulates income with no planned dividend distributions.

2026-04-01

Risks

The R1 share class has a summary risk indicator of 2 out of 7, and actual risk can vary significantly if the investment is exited early. The main risks are equity risk, credit risk, interest rate risk, liquidity risk, inflation risk, taxation risk, counterparty risk, currency risk, derivatives risk, risk related to efficient portfolio management techniques, risk related to investments in other UCITS and UCIs, and risk related to investments in contingent convertible bonds. The fund measures global exposure using absolute VaR and has expected derivative leverage of 200% of NAV, calculated as the sum of notionals; actual leverage may significantly exceed that level. These risks are driven by the fund’s flexible allocation across equities and debt, use of OTC and exchange-traded derivatives, exposure to non-investment-grade and non-rated bonds within set limits, and allowance for emerging-market exposure. Investors may receive payments in a different currency, creating currency risk. Other materially relevant risks not included in the summary indicator are default risk, operational risk and management risk.

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Asset manager

The management company is FundPartner Solutions (Europe) S.A., part of Pictet Group, authorised in Luxembourg and regulated by the CSSF. FundPartner Solutions (Europe) S.A. was established on 17 July 2010 as a Luxembourg société anonyme, has its registered office at 15, avenue J.F. Kennedy, L-1855 Luxembourg, and had capital of CHF 6,250,000 on 1 April 2026. The investment manager is LFG+ZEST S.A., with registered office at Via Ferruccio Pelli 3, CH-6900 Lugano, Switzerland. LFG+ZEST S.A. was incorporated in Lugano on 12 June 2012, has corporate capital of CHF 800,000, is authorised to manage portfolios of securities and financial instruments, and is regulated by FINMA.

2026-04-01