addition of first-class government bonds with low correlations to equities
leads to a more robust overall portfolio. The fluctuations in value
(volatility) and maximum losses (maximum drawdown) are significantly reduced.
bond indices are not efficient
indices weight bonds by debt (issue volume). The more heavily an issuer is in
debt, the greater its weight in the index. Indexing rewards the biggest
borrowers, resulting in sub-optimal capital allocation and portfolio
portfolio optimisation solves this problem
portfolio optimisation considers all relevant risk factors. Focusing on best
credit ratings and highest liquidity minimises credit and liquidity risks.
Risk-based optimisation leads to optimised weighting and diversification of
interest rate risks. Foreign currency risks are almost completely hedged.
Clear focus on quality: With
our risk-based portfolio optimisation, we place clear focus on first-class
bonds with: Low credit risk, high liquidity and optimal correlation
characteristics to the overall portfolio.
Systematic diversification: We
forecast the risk characteristics for eight interest rate zones and derive an
optimally diversified portfolio.
constructing a portfolio, we systematically follow a 3-stage investment process
with no discretionary leeway for portfolio management.
‘only’ government bonds?
optimised portfolio of high-quality government bonds may well carry only
minimal risks, but currently it also provides a low or even negative return -
depending on the interest rate environment. Taken in isolation, this asset
class seems rather unattractive. However, from a risk perspective, adding it to
an overall portfolio makes sense.
airbag in your portfolio
In the long term, equities offer an excess
return compared to bonds (equity risk premium). Investors are therefore well
advised to use their risk budget primarily for equity risks rather than less
diversifiable credit risk. The bond component of the portfolio should be
invested as safely as possible.
government bonds boast high diversification potential for equities. Whilst
other asset classes - frequently mixed as supposedly diversifying investments -
might correlate more strongly than expected with equity markets in times of
crisis, first-class government bonds can maintain their negative correlation.
I invest with OLZ?
global bond strategy, with its focus on first-class government bonds, is
available as both a medium-term and longer-term maturity fund. By
agreement, client-specific targets and restrictions (investment universe,
duration, specific sustainability criteria, maximum weights, etc.) can be
integrated into the investment process for direct mandates.