OLZ Equity World ex Switzerland Index Optimized ESG: Index-close, yet risk-aware

The new strategy puts low relative risk at its core and also counteracts the enormous index concentration in the MSCI World ex Switzerland. In addition, the fund is of interest to investors who also want to invest with ESG considerations in mind. The widely used passive solution of the MSCI ESG Selection Index exposes investors to even higher concentration risks due to its ESG approach, meaning the OLZ Equity World ex Switzerland Index Optimized ESG fund delivers clear added value.

Since its launch on 27.06.2025, our new strategy has met with broad demand: we currently manage around CHF 300 million for our clients. Particularly pleasing is the significant outperformance versus the MSCI World ex Switzerland, which stands at 5.9% in a challenging environment.

How we keep relative risk low

The investment process focuses primarily on minimizing the tracking error versus the MSCI World ex Switzerland while adhering to diversification and sustainability criteria. As a result, the tracking error has remained below 2% since data became available in February 2007, whereby performance prior to the launch on 27.06.2025 is based on a backtest.

In addition, quarterly rebalancing limits the deviation of country and sector weights relative to the MSCI World ex Switzerland to +/-5%. Looking at the monthly sector deviations versus the MSCI World ex Switzerland since launch, it becomes clear that the IT sector in particular has been overweighted. This overweight in IT names results from the better sustainability metrics of the selected companies.

How we significantly reduce concentration risk

Historically, concentration in the MSCI World ex Switzerland is at an extreme level. Comparable levels of concentration were last observed during the dot-com bubble in 2000 and the oil crisis of 1973. With the "Magnificent Seven" currently accounting for over 22% of the MSCI World ex Switzerland, the performance of the entire index hinges on just a handful of stocks. That is why the OLZ Equity World ex Switzerland Index Optimized ESG caps single-stock weights at 2.5%. As a result, the weight of the "Magnificent Seven" can be significantly reduced, standing at 9.5% as of 30.06.2026.

How we reduce absolute risk

In addition to the focus on minimizing tracking error, the investment process also modestly minimizes portfolio variance. Long-term analyses of our OLZ Equity World ex Switzerland Index Optimized ESG fund show that this approach has led to a consistent reduction in risk. While the long-term volatility of the OLZ strategy stands at 18.0%, the MSCI World ex Switzerland shows a volatility of 18.6%.

A look at event-based drawdowns shows that the OLZ strategy recorded slightly lower losses in every event. It is worth noting that this risk reduction is deliberately constrained by the focus on minimizing tracking error, so as to still participate to a large extent during periods of rising markets.

How we improve the sustainability profile

Sustainability is another core element of the investment strategy. The OLZ Equity World ex Switzerland Index Optimized ESG applies both norm-based and values-based exclusion criteria. By integrating the ESG score, carbon footprint, and carbon intensity, the fund ensures a significantly improved ESG profile relative to the MSCI World ex Switzerland. As of 30.06.2026, the OLZ fund improves the ESG score versus the benchmark by nearly 15% and substantially reduces carbon intensity by 45%.

Why now is a good entry point

Meanwhile, the valuation of the MSCI World has reached dizzying heights. Looking at the price relative to the average earnings of the last ten years, valuations above today's level of 38.2 were last observed just before the dot-com bubble burst.

Analyses confirm: as valuations rise, future long-term returns decline. The reasons for this are the increased downside exposure and correction risk. Given the currently high valuations, the risk reduction offered by the OLZ Equity World ex Switzerland Index Optimized ESG is particularly valuable: an analysis of MSCI World valuations against the OLZ strategy's subsequent three-year outperformance versus the benchmark clearly shows that, at every point in the past where the price/earnings ratio exceeded 25, the strategy went on to outperform.