Solactive joins forces with Sarasin & Partners LLP on the Sarasin Systematic Efficient Indices

SSEA Indices are designed to provide core building blocks for asset allocators to achieve core exposure, diversification and access to three proven risk premia: momentum, low volatility and size. The current range includes indices constructed to outperform the respective country benchmarks.

A commonly shared investment goal of rational investors is to maximize their portfolios’ efficiency AKA risk-adjusted returns, prevalently measured by the Sharpe Ratio. One of the problems encountered in using the conventional Sharpe Ratio on a forward looking basis is the lack of stability in a stock’s underlying trends.

Sarasin Systematic Efficient Approach is focused on constructing highly efficient portfolios in a more robust way by addressing the stability problem of the Sharpe ratio through Sarasin & Partners’ proprietary efficiency technique.

Steffen Scheuble, CEO, Solactive, says: “Solactive is happy to announce our cooperation with Sarasin & Partners on the calculation of indices that not only aim to outperform country markets but also employ a sophisticated and proven methodology – a methodology that is passionate about obtaining a sustainable profit in the mid-long term.”

Andrea Nardon, Partner, Sarasin & Partners LLP, states: “The epic rise and wide range of alternative weighting and factor indices, AKA Smart Beta products, may well leave investors overwhelmed as to which risk factor to choose and when. We are proud to deliver a robust, transparent, cost-efficient methodology that enables investors to gain core equity exposure, enhanced portfolio efficiency, diversification and broad market representation. The methodology, which is squarely focused on efficiency, is uniquely positioned to benefit from exposure to three proven risk premia whilst avoiding problems inherent to multi-factor optimization.”

The SSEA Indices are calculated as total return. Central to an SSEA index construction is the ranking of stocks based on their efficiency profiles. Approximately 50% of the most efficient stocks in an investable universe are selected which – combined with a non-cap market weighting of constituents – results in a very well diversified outcome. “By its construction, an SSEA index results in a broad market representation”, says Nardon. The indices are rebalanced at the beginning of each month.

All 5 SSEA indices outperformed their respective benchmarks throughout the last 3 years of live performance and historical back-tests going back to 90s. To illustrate, SSEA Europe delivered a Sharpe Ratio of 1.4 vs 0.8 of the Eurozone benchmark (between Aug 10 and July 15).