Key features
- Cutting-edge hybrid investment approach, overseen by an experienced portfolio management team, leveraging Quantitative Investments' strong systematic expertise and tools
- Multi-asset solution with clearly defined objectives
- Combination of focus on climate change, innovative systematic ESG rating based on financial materiality, and active ownership
- Risk-focused approach that aims to deliver asymmetric returns with a lower probability of negative outcomes
"In our hybrid approach, the machine and I act as a team throughout the process, with complementary strengths and weaknesses. This interplay of systematic and discretionary strategy proves effective in making investment decisions that also meet certain social and environmental characteristics."
Wave monitor
Wave, our proprietary business cycle model, divides the business cycle into four phases: slowdown, contraction, recovery, and expansion. The expected returns of assets are related to their sensitivity to changes in economic conditions: Recovery and expansion are generally more favorable for stocks, while slowdown and contraction are more favorable for bonds.
Wave analyzes a large amount of data daily to determine the current business cycle (shown in the center of the circle) for the world, economic regions, and individual countries. The circle segments show the probability of evolution for the future business cycle. The future business cycle indicated by Wave serves as the basis for portfolio allocation decisions in the Multi Asset Solution (MAS) strategy. Below, you can interact with Wave to see past business-cycle developments.
Source: Vontobel, February 2024
Can you beat MAS?
The goal of active asset allocation is to outperform a fixed-weight portfolio by achieving a better risk-adjusted return. The index represented by the blue line represents a global balanced portfolio with fixed weights in two asset classes (implemented via ETFs, considering their fees):
- Global equities (45% MSCI World, hedged in euro; 45% MSCI Core Europe; 10% MSCI Emerging Markets, hedged in euro).
- Global bonds (hedged in euro)
By moving the slider, you can compare the performance and risk parameters of the MAS strategy with that of different portfolios with fixed weights.
Historical performance is not indicative of current or future performance.
Source: Vontobel, February 2024
Investment process
The MAS strategy is implemented via a hybrid approach that aims to combine the best of two worlds: On the systematic side, we follow a rules-based, hence highly disciplined methodology for the purpose of stable outperformance and enhanced portfolio diversification. On the discretionary side, our portfolio managers use their skills and expertise to generate as much alpha as possible, especially in inefficient markets.
The investment process combines top-down and bottom-up elements. The top-down analysis consists of a fundamental systematic review of the major global economies, both currency and interest-rate analyses, and an assessment of the potential returns of global markets by Wave, our proprietary business-cycle model. Using a special preference matrix, the portfolio managers also bring in their own views with the aim of optimizing the asset allocation.
As part of the bottom-up approach, the stock selection process draws upon Vontobel's in-house research capabilities with fundamental and factorial approaches. The final selection decision is at the discretion of the portfolio managers. It is based on a rigorous evaluation and selection process, including a thorough ESG analysis using our proprietary scoring system.
During the portfolio construction phase, the investment team conducts multiple factor analyses, stress tests, and ex-ante risk assessments to match the target risk-return profile and desired factor exposures.
Innovative ESG process
We believe that considering ESG characteristics in a portfolio can enhance its risk-return profile. Embedded in our investment process – alongside traditional financial analysis – we adopt a screening methodology that filters out companies based on predefined ESG indicators. At the heart of this process is our innovative ESG rating tool developed inhouse with the aim to systematically identify ESG issues that may have a significant positive or negative financial impact on a company or sector. From this information we then compile our Materiality Map, our guide to actively adjust each company’s weighting in the portfolio.
In addition, we use a best-in-sector approach to address the issue of human-induced climate change. By combining backward- and forward-looking metrics (carbon intensity, climate value-at-risk, and warming potential), we select the top 90 percent of issuers in each sector.
Investment philosophy
Our investment philosophy is based on fostering innovation through proximity to research. We strongly believe that tools and data-driven processes lead to unbiased decisions. We use the knowledge of systematic processes, but the final decision remains with the portfolio managers (hybrid approach). Our goal is to add value in both tactical management and security selection. We consider diversification across different asset classes and risk management to be key in achieving a positive absolute return above the risk-free interest rate over the long term.
Investment team
Our portfolio-management team is responsible for the entire investment process of the MAS strategy. It uses the proprietary models developed and implemented by Quantitative Investments for the daily management of the portfolio. Throughout the various stages of the investment process, the portfolio-management team is supported by the entire Quantitative Investments team in the creation, development, and maintenance of the quantitative models. In addition, we leverage the research of the other Vontobel investment teams to incorporate the expertise of our entire company into our decisions.
