Performance & Volatility
Last valuation date : 22-07-2019
Risk / Return from 01-08-2002
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 Small Cap Europe Equity Excess Return Index is a dynamic strategy index with exposure to a basket of European liquid and marketable stocks selected on the basis of their low market capitalisations, combined with a continuous hedge on the EURO STOXX 50® Index.
The aim of the index is to allow investors to tap into the potential vigorous growth that may be offered by some Small Caps stocks relative to Blue Chips, 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 Small Cap Europe Equity Excess Return Index, a stock must meet the same criteria than within the NXS Small Cap Europe Equity Index.
The stocks in the basket are equally weighted daily and dividends are reinvested. Additionally, the Beta between the NXS Small Cap 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 Small caps risk premium is part of the Fama-French three-factor model (1992) to explain equity returns. The approach involves taking advantage of a risk premium related to small-scale companies, which results from the fact that these companies are naturally riskier as they have uncertain revenues, fewer financial resources and pose a greater default risk in times of crisis.
Small Caps have outperformed Large Caps over the long term to offset this risk or in the wake of announcements or acquisition rumours. Small Cap factor also strongly benefits from recovery markets. An investment in Small Caps also offers a source of
diversification as these stocks are less correlated to the equity markets in relation to large caps companies.
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 Small Cap Europe Equity Excess Return Index, the exposure to the stock selection is combined with a continuous hedge on the EURO STOXX 50® Index that aims to Betaneutralise the sensitivity to the price movements of the benchmark.