Do you know your benchmark?

„It ain’t what you don’t know that gets you into trouble. 

It’s what you know for sure that just ain’t so.” Mark Twain

Building investment strategies & portfolios

Sautterinvest uses the insights of leading investment organizations and third party experts, to formulate the firm's view on portfolio positioning. However, we also do our own financial analysis and research concerning stock/fund selection and asset allocation.

Do you know your indirect EM exposure?

As companies increasingly derive income from sources outside of their home country, it may be misleading to look at issuers' domiciles (mkt. cap.) to determine a portfolio's regional exposures. MSCI World, for expample, has zero exposure to Emerging Markets under its domicile-based methodology.  However, when rebalanced on a revenue basis, exposure to emerging markets reaches over 18%. Investors concerned that they may be missing out on EM exposure by choosing a developed-market benchmark for their portfolios may find they have considerable indirect exposure after all. Analysing companies' revenues by region instead of headquarters can significantly alter the apparent composition of an investment portfolio. From an active-management perspective, understanding revenue sources makes sense as stocks are typically valued on estimates of future income.

MSCI World Index (30.6.2012) Domicile % Revenue % Diff. ppts
North America 59.2 47.4 11.8
Europe 26.3 22.1 4.2
Asia/Pacific ex Japan 5.6 4.2 1.4
Japan 8.9 8.3 0.6
Emerging Markets 0 18 -18
  100 100  

Do you know your cyclical exposure?

Sector Weightings MSCI World %  30.11.2015 Rec.
Consumer Staples 11.4 defensive non-cyclical O/W
Consumer Discretionary 11 cyclical O/W
Energy 10 cyclical U/W
Financials 20.4 cyclical U/W
Healthcare 11 defensive non-cyclical O/W
Industrials 11.1 cyclical U/W
Technologies 11.7 defensive non-cyclical O/W
Basic Materials 6.2

cyclical

U/W
Telecoms 3.8 defensive non-cyclical N
Utilities 3.4 defensice non-cyclical N
  100    
O/W = overweight
U/W = underweight
N = neutral

FTSE Global All Cap Industry Weights

S&P500 Index Performance & Sector Weightings

FTSE All-World Index

FTSE_GEIS_Brochure_V1.pdf
Adobe Acrobat Document 914.9 KB
FTSE All-World Index_20131031.pdf
Adobe Acrobat Document 152.0 KB
Urban World: The Shifting Global Business Landscape (Oct. 2013 McKinsey)
MGI_Urban_world3_ES_Oct2013.pdf
Adobe Acrobat Document 1.3 MB

Global Real Estate Index

FTSE EPRA NAREIT Global.pdf
Adobe Acrobat Document 167.2 KB

Equal weighted strategies (BM)

Equally weighted asset allocation strate
Adobe Acrobat Document 276.8 KB
whitepaper_parity_strategies.pdf
Adobe Acrobat Document 1.7 MB
Equal Weighting and Style Sector Exposur
Adobe Acrobat Document 161.5 KB

Minimum Variance Indices (BM)

stoxx_mv_intro.pdf
Adobe Acrobat Document 6.1 MB

Factor Investing (BM)

Foundations_of_Factor_Investing.pdf
Adobe Acrobat Document 1.0 MB

Absolute Return Strategies

Funding an absolute return strategy depends upon investor goals

 

Conclusion:

 

 

The goal of absolute return strategies is not  to be the highest returning asset class, but to provide higher efficiency with lower equity beta. This analysis provides strong evidence that unconstrained, benchmark-agnostic strategies that focus on more efficient returns with less systematic risk (beta) can be a powerful tool for improving the efficiency of an investment plan.

Prudency  is part of our culture


Prudency is the starting point for our strategy.

 

We do not  track indices closely. Instead of focusing on relative risk, we look at absolute risk, while the whole finance industry is concentrating on benchmarks. 

And closely following a benchmark isn’t necessarily in clients’ interests. For both individual and institutional investors, preservation of capital is more important.

 

For institutional investors, such as pension funds, our focus on lower risk is also attractive because it can help stabilize funding ratios. 

So prudency isn’t just part of the strategy, it’s also part of our investment philosophy.

 

Active investment management is about blending your portfolio with low-volatility strategies and the inclusion of value and momentum factors, which has proven very effective over the past years.

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