Benjamin von Haase
Head of Risk Control & Multi Asset
State-of-the-art mixed portfolios with Finreon Multi Asset Solutions.
Dynamic risk management, systematic optimization.
Finreon Multi Asset are mixed portfolios, where the most important risks are monitored and controlled by means of an integrated risk management. In addition, other Finreon solutions can be added to the portfolio on a modular basis at the customer's request (e.g. reduction of cluster risks, factor premiums, reduction of the carbon exposure of portfolios).
With portfolios tailored and individually optimized to your needs, investors benefit from state-of-the-art risk management of your most important portfolio risks - equity, interest rate and credit risks - as well as additional returns through scientifically proven return drivers.
Finreon Multi Asset offers a cost-effective and customized implementation with modular fund modules according to the motto "active where necessary, passive where possible". The implementation takes place flexibly in cooperation with a partner bank of your choice.
Systematic risk premia Asset classes bear various risks. Investors taking systematic risks are compensated by a risk premium in the long-run. Each kind of systematic risk thus represents a long-lived source of revenue and contributes positively to the expected return on the overall portfolio. Hence, mixed portfolios allow investors to profit from a wide range of risk premia.
Which and how much risks? Portfolio management always implies risk management. Based on the individual risk capacity (risk budget) as well as on the return requirements, investors decide which and how much of the equity, interest rate, credit and further risks they are able to bear. Notably, equities make up a large part of the overall risk composition. The risk contribution of bonds tends to increase in the current low interest rate environment.
Losses of substance as an issue While normal fluctuations are tolerable for the investor, crashes inflict heavy damages on the portfolio due to substance losses. Crashes do not only annihilate the return, but also the capital with which future returns can be generated. Stock market crashes are as “normal” as volatility – they seldom but regularly occur. Also, sharp interest rate rises and crises, sharp interest rate increases and crises in credit markets may lead to losses on bonds.
Dynamic risk control Risk management should hence concentrate on reducing substance losses (drawdown management). A static asset allocation means that the investor fully bears all losses of substance. A dynamic risk control, however, enables investors to profit optimally from their risk budget. While the risk exposure is reduced over high-risk regimes, systematic risk premia can be efficiently earned during phases of lower risks.
Outperforming the market Investors have two possibilities to generate an outperformance. They can either select an active manager and trust in his forecasting skills (stock picking and timing capacities) and his experience. Or they can decide to seek for an outperformance using established, scientifically proven Smart Beta methods in a systematic and non-predictive way.
Systematically more return per risk Active management often goes together with high costs, long term underperformance and lack of transparency. In contrast to this, Smart Beta approaches are characterized by systematic and transparent optimizations. Anticyclical rebalancing, diversification and/or the exploitation of additional return sources of return (factor premia) thus lead to the efficient management of equity investments.
Mitigating climate change and transitioning to a carbon neutral economy is one of the biggest challenges of the coming years. "Business-as-usual" is no longer an option. Climate change and numerous measures to mitigate it constitute a systemic risk. The integration of this risk is therefore becoming increasingly important as an elementary component of holistic risk management in all sectors.
An innovative concept The objective of Finreon ZeroCarbon® is not only to reduce the carbon exposure of portfolios with a market-based solution but to neutralize it. By negatively weighting securities with high CO2 emissions (High Carbon) and positively weighting securities with low CO2 emissions (Low Carbon), the Finreon ZeroCarbon® solution aims to neutralize the carbon exposure of investment portfolios with a CO2 hedge.
Finreon Multi Asset Solutions By means of an integrated risk management, Finreon Multi Asset Solutions dynamically manage the most important risks in the portfolio on a daily basis – namely equity, interest rate, and credit risks. Optimizations within the different asset classes further seek to generate a higher return on the taken risk.
Robust portfolios Finreon Multi Asset Solutions are rule-based, free of any prognosis and fully transparent. Mixed portfolios are tailored to each client's specific risk budget and needs; fully risk-controlled and optimized. The goal lies in achieving a more attractive risk/return profile as well as more robust performance characteristics. Finreon offers state-of-the-art mixed portfolios for any risk profile.
For further information about our mandate solutions, please contact us. In the context of mandates, balanced portfolios allow to be tailored to the clients’ specific needs and to be managed in a customized way. Finreon, as an independent investment advisor, collaborates with the partner of the clients' choice. Hence, the customer is assured to get the best specialist for each stage of the investment process.