Three alphas when investing
Put in simple terms: the Vontobel 3α-Investment Philosophy®
Our Vontobel 3α Investment Philosophy® is based on the conviction that we can generate added value for you by actively managing your assets. The focus is on three sources of yields - also called alphas.
The 3α pyramid: flexibility at three levels
3rd alpha: targeted selection, for example of individual equities. We add short-term opportunities to the portfolio and take advantage of the fact that the capital markets sometimes react strongly to news.
2nd alpha: investments with high conviction. This includes economic changes such as macro- and megatrends. For equity investments, our long-term conviction lies in our “Global Quality Achievers” model, which focuses on the substance of a company.
1st alpha: A robust and broadly diversified portfolio is the foundation to be able to realize a value increase in the long-term. We rely on active management here as well.
|ESG factors can be taken into consideration where they are appropriate and desired.|
What exactly does alpha mean
The easiest way to explain the term “alpha” is to compare it to the term “beta.” Both terms describe the way an investor obtains yields in the financial markets.
- Beta (β) is generally described as “market return.” It is what financial markets yield in terms of returns without requiring any special skill or knowledge. Or, in other words: Beta is the premium that you receive for buy-and-hold, for example in a classical 60/40 portfolio. Investments in the MSCI World Index or another broad investment index are common in this context.
- In contrast to this, alpha (α) is additional income. Alpha sources of return are generated by active management in addition to the market return or beta. Alpha is important because returns can be generated over the course of time from the interest effect of this additional income, which would not be possible - or only be possible with difficulty - with a pure market portfolio.
With the Vontobel 3α Investment Philosophy®, we are pursuing the goal of realizing this alpha at three portfolio levels: strategically at the “diversification” level, thematically and tactically at the “conviction” level and in connection with individual equities at the “opportunities” level. For this reason, we operate as an active manager at all three levels and favor active portfolio management.
The three alphas at a glance
As the cornerstone and first alpha, the Vontobel 3α Investment Philosophy® contains broad diversification and diversification of assets across several forms of investment. It enables robust asset allocation across different asset classes and currencies and also reduces the typical risks of traditional asset classes.
Investments that convince us in the mid- to long-term make up the second possible source of yields and thus the second alpha of our investment philosophy. For the second alpha, we focus on quality equities as well as subjects such as economic changes or trends.
We achieve the third alpha with short-term investment opportunities. By attentively observing the market and acting flexibly, we are able to react quickly to even the smallest items of news and create investment opportunities.
1 hour free consultation – by phone or in person
Would you also like to access sources of yield with active management? Do you have questions about the Vontobel 3α Investment Philosophy®, or would you like a non-binding initial advisory consultation? Ask for an advisory meeting, or call us at: +49 89 411 890 31 74
In the explanatory video, you will learn about the practical added value that the Vontobel 3α-Investment philosophy® offers you.
Active investment management in practice
Comparison: The performance of the 3-alpha megatrends fund and the MSCI ACWI Net TR
© Vontobel Asset Management, source: Vontobel, MSCI
Comparison period: September 2019 to February 2021. The MSCI ACWI Index was launched in January 2001. It tracks large and medium-sized companies from 23 industrial countries and 27 emerging markets. With 2,964 constituents, the index covers around 85 percent of the worldwide, investable stock possibilities. Performance is shown in US dollars. The yield expressed in euros may rise or fall due to volatility in currency. The performance is also presented as net performance and takes all commission, fees, and other charges into account.
Past performance is not a measure of future performance. The performance data does not take commissions or costs into account, which are collected when shares are issued or redeemed. The funds’ yields may rise or fall since exchanges rates between currencies change.
Yields and risks at a glance
Optimized for long-term investments
Various investment opportunities are available to you depending on how heavily you want to use individual sources of yields. We invest in a risk-conscious way. We evaluate your portfolio diversification across multiple asset classes and the risks of individual investments in your portfolio using the “value-at-risk” approach¹.
With this type of risk monitoring, you benefit from a more flexible implementation of your investment targets and receive more transparency about the risks that your investment strategy is based on. We also show counterparty risks in your portfolio in a way that is appropriately simple and clear.
Our risk assessment is completed by scenario analyses. Using these analyses, we will show you how past crises would have influenced your portfolio.
Our risk engine, which we developed ourselves, covers all asset classes with more than 450,000 instruments and calculates risk, taking around 140 risk factors into account. In only a few milliseconds, the overall risk can be calculated for an average portfolio with around 20 positions.
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