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Brendan Maton
Minimum Variance Indices have multiple usages for investors as part of their asset allocation:
• Indices provide a portfolio with lower volatility (i.e. risk) but with full exposure to relevant equity markets.
• Minimum Variance portfolios use less risk budget available to investors.
• Due to efficient portfolio construction no “overspending” of risk in relation to achievable return.
• Shortcomings and structural performance deficits of market cap weighted indices are mitigated through alternative weighting mechanism.

STOXX+ Minimum Variance Indices have been developed in collaboration with Axioma, a leading provider of portfolio constructions tools and risk models. Axioma provides the fundamental factor model used to calculate the rebalancing portfolios.

Multiple index versions to cater for a broader investor base
• Create a stand-alone minimum variance strategy index family (unconstrained version)
• Create a minimum variance improvement on market-cap. weighted benchmarks (regular version)

Unconstrained index version is a novelty and offers the following benefits:
• Full optimization to minimize risk
• With only very basic constraints, there is the freedom to provide increased optimality in resulting portfolio
• Resulting portfolio might have a bias towards certain properties (specific factor, geography etc.) as the aim is purely to minimize variance
• The freedom is expected to provide lower risk
Jun 12 2012
60 mins
Minimum Variance Indices
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  • Live at: Jun 12 2012 9:00 am
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