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BNP Paribas L1 Equity World Low Volatility

The Fund BNP Paribas L1 Equity World Low Volatility seeks to outperform the MSCI World Index over a full market cycle with risk reduction objective and limiting tracking error risk level. Absolute volatility is targeted to be lower than the MSCI World Index.

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BNP Paribas L1 Equity World Low Volatility * [1] is managed by constructing a portfolio investing in low volatility stocks and exploits a proprietary approach based on THEAM’s research results showing that the volatility anomaly is observed across all sectors and not only in defensive ones.

THEAM’s strategy differs from the ‘Minimum Variance’ approach which seeks simply to hold the lowest volatility stocks leading necessarily to stocks in non-cyclical, defensive sectors, and typically producing uncomfortably high levels of tracking error against the market cap index.

THEAM’s strategy achieves the objectives of reducing risk, improving Sharpe ratio, while controlling tracking error to avoid significant underperformance vs. market cap index when the market rallies. BNP Paribas L1 Equity World Low Volatility is a systematic strategy and rely entirely on a quantitative model developed in-house.

Portfolio construction

Trying to remove all unnecessary complexity, THEAM’s process is based on two steps:
- a-priori selection of stocks with the lowest volatility in each sector (investment universe is the MSCI World)
- focusing on investing in the pre-selected low vol stocks while controlling the tracking error risk rather than minimising absolute volatility. Because the risk profile of stocks changes over time, the model portfolio is rebalanced every month

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Track record of the Equity World Low Volatility strategy since 1995 (in USD)

*Investors should ensure that they are fully informed about the sub-funds, classes and sub-classes of shares that are authorized to be marketed in their country of residence and the constraints applicable in each of these countries

Performance since April 1st 2011 (date of implementation of the strategy Low Volatility) to February 28th 2013

Historical performance (net of fees, share I)

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Fund characteristics

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Next Finance , April 2013

Article also available in : English EN | français FR

Footnotes

[1] Ex BNP Paribas L1 Equity World Minimum Variance.

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Focus

Product iSTOXX™ Europe Minimum Variance

The approach initiated by Ossiam’s research and management team intends to obtain an optimized portfolio that includes a selection of stocks where volatility is among the lowest in the investment universe

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