Frankfurt-based index provider Solactive and asset allocation consultancy Panthera Solutions have launched the Solactive Panthera World Market Portfolio Index, a multi-asset allocation tracking the performance of 11 asset classes through a combination of ETFs and minor cash positions.
The Solactive Panthera World Market Portfolio Index uses ETFs to track the performance of a global multi-asset portfolio.
The index’s methodology is driven by the work of William Sharpe who in 1964 postulated that the market portfolio was the natural starting point in portfolio construction. Panthera Solutions, with the goal of providing a representative, broad-based benchmark for multi-asset investing, has developed a framework to measure the ‘Global Capital Stock’, considering both financial and non-financial investable assets.
Their research has resulted in a global market portfolio organized into 11 asset classes, each weighted in proportion to their respective market capitalizations. These include public equities, government securities, financial institutions bonds, nonfinancial corporate bonds, securitized loans, non-securitized loans, cash equivalents, cash, real estate, land and private businesses. The asset classes are represented by a minimum of two ETFs up to 47. Similarly, the weight of each ETF covering a specific asset class is proportional to its market capitalization within that asset class.
The underlying ETFs, which act as components of the Solactive Panthera World Market Portfolio Index, are selected based on their ability to accurately track each asset class and represent the underlying market properly. The index is rebalanced monthly.
The index may be used as a benchmark against which to compare the performance of multi-asset portfolios, to analyse the relative performance of each asset class through time, the parent index of active strategies or as the foundation on which to build investment products such as ETFs.
Steffen Scheuble, CEO of Solactive, commented: “Most benchmark solutions for multi-asset strategies have typically focused on traditional financial assets, thus overlooking non-financial ones. The consequence is a partial picture of asset holdings globally. In order to fill the gap, Panthera Solutions and Solactive have come up with a proxy for the global asset market taking into account both financial and alternative assets. This is captured by the Solactive Panthera World Market Portfolio Index, which can be considered as one of the most representative and least biased benchmarks for multi-asset investing in the market so far.”
Markus Schuller, managing partner at Panthera Solutions, added: “In recent years, multi-asset investing became increasingly popular. In Europe alone, more than 14.000 multi-asset funds are offered. Evaluating their asset allocation quality with traditional risk measures or non-representative benchmarks has proven to be insufficient. The Solactive Panthera World Market Portfolio Index offers the very first representative benchmark for multi-asset strategies as it is based on the Global Capital Stock.”
The index is published in US dollars and calculated as a price return, net total return and gross total return index. As of the launch date, the index was composed of 78 ETFs. The largest exposures are to the SPDR MSCI World Small Cap UCITS ETF (21.0%), the iShares Global REIT ETF (19.6%), and the PowerShares Chinese Yuan Dim Sum Bond Portfolio (6.4%).
Using backtested data, the index is up 6.7% year-to-date. Since its inception in May 2007, the index has returned 3.4% per annum with an annualized volatility of 15.5% although this performance may be influenced by the effects of the global financial crisis in late 2007 and 2008.
Source: Solactive.