Three large companies dominate the Swiss equity market: Nestlé, Novartis and Roche. In terms of market capitalization, the "Big3" account for around 50% of the total market over the past 15 years. This concentration is not without its problems and raises a number of questions, particularly with regard to diversification. Nevertheless, for many investors the size of the three stocks alone gives them a special status and systematic exclusion seems almost unthinkable for most. But what does it really look like? How dependent is a portfolio on the "Big3"? How big is their contribution to the risk of the portfolio? What impact does exclusion have on portfolio performance? And last but not least: Is it permissible to go so far as to completely dispense with these three companies?
Below we show how a systematic exclusion of the three large SPI stocks affects the OLZ Minimum Variance portfolio. We calculate two variants of our Swiss equity model: one based on the normal SPI universe ("OLZ Eq CH Opt") and the other excluding Nestlé, Novartis and Roche ("OLZ Eq CH Opt excl Big3").[1] The benchmark is both the SPI and a rescaled variation excluding the three large stocks ("SPI excl Big3").[2] The results for the period 2003 to 2019 are shown in the following two tables[3]: