The addition of first-class government bonds with low correlations to equities leads to a more robust overall portfolio. The fluctuations in value (volatility) and maximum losses (maximum drawdown) are significantly reduced.
Standard bond indices are not efficient
Standard indices weight bonds by debt (issue volume). The more heavily an issuer is in debt, the greater its weight in the index. Indexing rewards the biggest borrowers, resulting in sub-optimal capital allocation and portfolio composition.
OLZ portfolio optimisation solves this problem
OLZ portfolio optimisation considers all relevant risk factors. Focusing on best credit ratings and highest liquidity minimises credit and liquidity risks. Risk-based optimisation leads to optimised weighting and diversification of interest rate risks. Foreign currency risks are almost completely hedged.
Clear focus on quality: With our risk-based portfolio optimisation, we place clear focus on first-class bonds with: Low credit risk, high liquidity and optimal correlation characteristics to the overall portfolio.
Systematic diversification: We forecast the risk characteristics for eight interest rate zones and derive an optimally diversified portfolio.
Systematic investment process
When constructing a portfolio, we systematically follow a 3-stage investment process with no discretionary leeway for portfolio management.