Performance & Volatility
Last valuation date : 04-03-2021
Risk / Return from01-08-2002
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.
NXS Low Volatility Europe Equity Excess Return Index is a dynamic strategy index with exposure to a basket of European liquid and
marketable stocks with low volatility that are liquid and tradable, combined with a continuous hedge on the EURO STOXX 50® Index.
The aim of the index is to allow investors to gain access to a basket of European stocks with low volatility, and to stabilise the volatility of the performance and capture the outperformance of the selected stocks vs. the benchmark
To be included in the NXS Low Volatility Europe Equity Excess Return Index, a stock must meet the same criteria than within the NXS Low Volatility Europe Equity Index. The stocks in the basket are equally weighted daily and dividends are reinvested.
Additionally, the Beta between the NXS NXS Low Volatility Europe Equity Excess Return Index and the futures on EURO STOXX 50® Index is calculated on a monthly basis. The sensitivity of the stock selection to the market is neutralised by shorting EURO STOXX 50® futures proportionally to the calculated Beta.
The strategy consists of taking advantage of a persistent anomaly observed on the equity markets: the least volatile stocks deliver better performances than the most volatile stocks over the long term. This anomaly is due to behavioural biases such as investor risk aversion during periods when markets are stressed or the irrational search for outperformance.
This strategy is particularly well-suited to investors sensitive to their exposure’s risk-adjusted return, and its outperformance versus the benchmark is noticeable during a period of highly stressed markets. The strategy also seeks to avoid the sector bias typical of such strategies by adding a sectorial diversification constraint.
The aim of the risk management process included in the Index is to reduce sensitivity to market movements and offer greater performance stability compared to a direct equity investment. Within the NXS Low Volatility Europe Equity Excess Return Index, the exposure to the stock selection is combined with continuous hedge on the EURO STOXX 50® Index that aims to Betaneutralise the sensitivity to the price movements of the benchmark.