Standard equity indices are not efficient
Standard indices weight equities by size (market capitalisation). Financial market research confirms that these indices do not have an optimal risk-return-ratio (Sharpe Ratio). Portfolios can be put together more optimally.
OLZ portfolio optimisation solves this problem.
We forecast the risk characteristics for each individual equity within an equity universe and from this we derive an optimally composed portfolio. Our target portfolio is the portfolio with the lowest risk or to put it more technically: The ex-ante minimum variance portfolio.
More robust portfolio: Thanks to improved diversification, risk-based portfolio optimisation leads to greater security. This manifests in lower risk and lower maximum losses.
Long-term excess return compared to market average: The minimum variance portfolio optimally captures the low-volatility premium. This results from the empirically proven fact that equities with low price fluctuations achieve above-average returns in the long term. This premium is not new but has been proven over several decades.
Sustainable investment with ESG integration
OLZ also incorporates ecological, social and ethical criteria (ESG Environmental, Social, Governance) into the composition of its portfolios.
Companies which do not meet key sustainability criteria are excluded from the investment universe (ESG exclusion criteria):
- Swiss Association for Responsible Investments (SVVK-ASIR) exclusion recommendations
- Companies which do not meet UN Global Compact criteria
- Companies with the lowest sustainability rating
- Companies involved in a serious controversy
In addition, particularly sustainable companies are given preference in OLZ portfolio optimisation and are more heavily weighted (ESG integration according to best-in-class).
For our investment process, we take into account MSCI ESG Research evaluations, a leading international provider of research and analysis in the area of sustainability.
Systematic investment process
When constructing a portfolio, we systematically follow a 3-stage investment process with no discretionary leeway for portfolio management.