The boom in AI and computer-led investing have hit the headlines over the past year but not all investors are as keen to embrace the changing landscape as others.
In this Selector Snapshot, we hear about fears over short-term fads and focus on why passives are increasingly more important.
Selector: Effi Bialkowski
Company: Van Lanschot (Netherlands)
We don’t select stocks or active funds for the asset classes we use but simply focus on index funds and ETFs. We have just modified our portfolio for the third quarter and, for example, use 10 MSCI World sectors to give our equity developed world coverage.
Elsewhere, we are also looking at global small-cap equity, emerging market equity but also listed private equity and gold. In terms of bonds, we have exposure to global government and global credits – both of which are euro hedged – and also emerging market debt, which is in hard currency and also euro hedged.
Other than that, in our model portfolios we also have listed real estate and cash or money market funds in the mix.
This system, which is called Index Plus, is one of our discretionary asset management services focusing on strategic asset allocation. We believe that this will determine the performance of the portfolio for at least 90%.
So, for instance adding thematic funds for a short period of time will not be part of the Index Plus process. As asset allocation is the most important factor for the Index Plus portfolios we use a proven asset allocation optimisation process based on the Black-Litterman model.
The weight of the different asset classes will change every quarter, depending on the long-term volatility, correlation and market capitalisation. Short-term trends, such as the interest in AI, will not have significant impact on these long term criteria and as such will not be part of the portfolio.
As selection is not part of the process we’ll only use index funds and ETFs, such as Vanguard, iShares, x-trackers, UBS and ETF Securities, for portfolio implementation.