Living Moments - N°2 Edition 2014

Zürcher Kantonalbank Österreich AG Herbert Lindner, Bereichsleiter Private Banking Getreidegasse 10 A-5020 Salzburg Telefon: +43 662 8048 135 www.zkb-oe.at just take responsibility for the manager selection in the new Vintage 14 fund of funds.“We also com- bine completely different strategies in order to set up a diversified portfolio with the most attractive risk-return profile possible. And we are implementing certain styles of investment more and more if they correspond with our economic and market image”, explains Nemeth: “For example, if we believe that stocks and shares will be in demand in future, then we take a little more risk and invest more in funds whose success depends more heavily on the perfor- mance of the stockmarket. If we aremore pessimistic then we incorporate more products similar to bonds. The risk control in this fund of funds there- fore takes place at three levels: through the strategy of the Absolute Return Fund, through the manager selection of the Austrian experts and the diversifi- cation between different styles of investment and categories of assets. “The price fluctuations in a portfolio of this type should therefore remain within bounds. The vola- tility that we expect in the portfolio is in the region of four to seven percent, and we aim to achieve returns of five percent per annum over the medium term.We believe that it is especially suitable for in- vestors who are looking to achieve a balanced risk profile”, concludes Nemeth. The Austrians have developed a completely new concept for investors who are looking for a higher share quota, but who are afraid of the risks being too high on the share side. Their strategy is as follows: make more profit over the long term by making fewer losses during the slumps. “We’ve determined that there is a strong correlation between the intensity of the fluctuations in share prices and market perfor- mance”, explains Nemeth. Greater volatility – the measure for price fluctuations – was actually always a good indicator of higher risks on the market in the past. “We want to use this correlation in our ‘Wachstums-Protect’ (growth protection) strategy. The portfolio is basically 100% invested in stocks from around the world.“If the volatility rises above certain fixed limits then we apply the brakes and reduce the level of investment. Once the market calms down and the volatility falls then we speed things up once again. If you react this way at a relatively early stage then you can keep up with the majority of longer-term trends on the stock markets. The advantage of this approach is its fast reaction time. “We can exit markets quickly at turbulent times but can quickly get back into them when things are calmer”, explains Christian Nemeth. The experts have calculated appropriate simulations aimed at checking whether and how this approach has stood the test of time in the past. “This so-called back testing is completely clean because the quotas are managed according to fixed rules. They are what they are - there are no adjustments made which can be used to make the results look better than they actually are.” The test shows that the model would have proved its value in the past. For instance today the global equity index in EUR is still around 15 percent below its last major high from January 2000. In contrast the Wachstums-Protect portfolio would have posted gains of almost 50 percent since that point, principally because the losses at the start of the millennium and in 2008 were capable of being limited significantly. The product obviously retains what the motto promises: more profits are made over the long term when you lose less in difficult market phases. 67 www.private-residences.net 7TaTYR 8ZXPY_^ advertisement