- Topics overview
- 3D Printing
- Disruptive Technology
- Global Gender Diversity
- Global Family Companies
- Robotics & Drones
- Swiss Low-Volatility
- Commodities (CMCI)
- Swiss Family Companies
Solactive Swiss Equal-Weight Index
Equally weighted investment in the 20 largest Swiss stocks
Open End PERLES on the Solactive Swiss Equal-Weight Index
I. Smart beta – an innovative approach
Smart beta is a buzzword that is increasingly popular among investors. This strategy blurs the boundaries between active asset allocation and passive positioning in a particular benchmark. Unlike conventional indices that are usually weighted by market capitalization, smart beta strategies use fundamentals. Common criteria include the volatility, dividends or certain evaluation parameters. Moreover, investors who endeavor to outperform the classic approach often make use of equal weighting. This is exactly where the new Solactive Swiss Equal-Weight index comes in, applying this smart beta concept to the Swiss equity market.
II. SMI – spellbound by Nestlé, Novartis and Roche
The SMI is doubtlessly the by far most significant index among Swiss investors. Since June 30, 1988, it has served as the benchmark for the mood on the Swiss equity market. The SMI contains the 20 largest and most liquid companies that are listed on the SIX Swiss Exchange. The weighting is determined by the market capitalization. This methodology results in a strong dependence on the three heavyweights Novartis, Nestlé and Roche. Together, this trio currently accounts for about 62 percent of the SMI. Thus, a concentration risk is inevitable in the case of passive investments that map the benchmark on a one-to-one basis.
III. Equal weight – central advantages
With the Solactive Swiss Equal-Weight index, investors can invest in Switzerland's 20 largest blue chips with equal weighting and thus in a more diversified form. In this way, they are less dependent on individual equities. At the same time, the new index circumvent the so-called "buy high, sell low" effect. In the case of conventional weighting by market capitalization, the proportion of an equity increases as soon as it gains value, and vice versa. As a result, the buyers of such a stock exchange barometer rely on the winners of the past. However, they are underweighted in securities that may be traded with a discount on their fair value at the particular time.
Opportunities & Risks