10 May 2013
Finding the balance between performance and risk
Finding the balance between performance and risk? Challenge conquered with the fund Seeyond Europe Min Variance.
Two and a half years after its launch, Seeyond Europe Min Variance(1) boasts an excellent track record in an initially very turbulent and then strongly bullish period.
Since its inception on 30 September 2010, the fund has returned 30.20%, outperforming its benchmark, the MSCI Europe index, by more than 7% with an annualized volatility reduced by more than a third and an attractive Sharpe ratio of 0.92 versus 0.42 for the MSCI Europe. (2)
With AUM up sharply to EUR 220 million, the fund ranks in the 2nd decile of Lipper's European Equity category3 for its performance over the period.
/// Could you tell us more on the Min Variance expertise developed by Seeyond ?
head of Smart beta
Seeyond, volatility management and structured product investment
division of Natixis Asset Management
"Seeyond Europe Min Variance and Seeyond Global Min Variance both leverage the variability and dispersion of European and global markets by focusing primarily on risk management.
In a context of double-digit market returns in the past twelve months, our systematic approach to risk and especially our effective stock selection have enabled the two portfolios to take advantage of volatility rebounds to significantly outperform the market.
As volatility is expected to remain in the intermediate range, our strategy should continue to outperform over the long term while delivering the lowest historical volatility of the market for this type of strategy. "
/// Why currently prefer the Minimum Variance approach in equity management?
Head of Seeyond,
Co-CIO of Natixis Asset Management
"In an environment dominated by worries about European growth, investors are cautious in equity markets. Because market movements are increasingly erratic, trends are much more difficult to identify.
The question therefore is: How can we durably achieve exposure to equity markets in such a context? Nowadays corporate earnings estimates do not seem reliable enough nor sufficiently proactive in uncertain markets to build a durable projection in equity markets. As such, it seems wiser to approach equities using the risk dimension, for example by focusing on reducing their volatility to better protect oneself against possible market declines without sacrificing their potential upward performance.
In this sense, the Minimum variance strategy can be a good answer because it aims to take advantage of opportunities in equity markets over the long term, while reducing fluctuations through the selection of the least volatile equities and those least correlated among each other. In attempting to mitigate the impact of market declines, the minimum variance strategy seeks to increase the likelihood of delivering a performance that exceeds that of global equity markets over a stock market cycle. The Seeyond minimum variance strategy should namely continue delivering an attractive long term risk-reward profile.
The Minimum Variance funds therefore offer investors the opportunity to improve the Sharpe ratios of their equity or diversified portfolios, thanks in particular to the constant optimization of Seeyond’s models and management processes, and thus also provide real diversification from traditional fundamental management.
/// MORE INFO:
(1) Fund governed by French law -AMF classification "International Equities" – I/C share in euro.
(2) Source: Natixis AM as of 30/04/2013. The Sharpe ratio is an indicator of a product’s outperformance relative to a risk-free rate (Eonia compounded in this case), taking into account the risk taken (volatility of the product). The higher it is, the better the fund is.
(3) Source: Lipper as of 30/04/2013. Category "Equity Europe" - "France & Offshore" universes.
The figures stated relate to past years. Past performance is not a reliable indicator of future performance. References to rankings or ratings of a UCITS are no guarantee of future performance.