Performance & Volatility
Last valuation date : 26-02-2020
Risk / Return from 02-01-2003
All information for an index prior to its Inception Date is back-tested, based on the methodology that was in effect on the Inception Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The key elements of the index methodology are available upon demand.
Natixis has developed an overlay hedging solution for equity portfolios adapted to insurance companies requirements.
• The index aims at reducing the main risk indicators:
– Maximum Drawdown,
– Value at risk.
• The strategy aims at controlling the cost of carry of the strategy:
– Choice of maturities on both the protection and financing legs,
– Self-adapting protection levels relevant with market risk aversion indicators.
• The strategy aims to reduce the Solvency Capital Requirement of an insurer’s equity portfolio and is recognised as a Risk Mitigation Technique.
• The strategy is a synthetic rolling collar strategy consisting of the following leg:
– the Call leg: a daily rolled short call positionwith 1-month expiry and strike levels varying from 100% to 106%,
– the Put leg: a daily rolled long put positionwith 12-month expiry and strike levels varying from 85% to 100%.
• The asymmetry of the expiries of each leg helps to control the cost of carry of the strategy; the strategy minimises the “time value” per year paid on the put positions and maximise the “time value” per year received on the call positions:
– the expiry and holding period of the put position is 12 months,
– the expiry and holding period of the call position is 1 month.
• The strategy dynamically adjusts strike levels based on the Natixis ARPI market risk perception indicator:
– strikes are closer to the money when the market risk indicator is high: this aims at limiting the volatility and drawdown of the equity portfolio in high risk regimes,
– strikes are further from the money when the market risk indicator is low.
• Starting point: Classic Equity Overlay strategy aiming to monitor the time value of the embedded options.
• Enhancement: a foreseeing signal – ARPI – As an indicator to determine the dynamic strike levels of the Put – and Call options.
• Regulatory Efficiency: recognition of the Risk Mitigation Techniques – defined under Solvency II (tactical hedge program).
• Bespoke application: applying and customising the strategy on the clients benchmark portfolio.