Regarding equities, we maintain a well-diversified, stable and value-oriented portfolio of global industry leaders. These have proven that they have achieved sustainable value creation and can also navigate through crises. To this end, the companies are systematically analysed using a 5P matrix:
- People: Who is in management and on the board, what is the personnel policy?
- Product: Are products easy to copy, irreplaceable and of high customer value?
- Position: Is there a leading market position, are there strong brands?
- Perspective: Assessment based on the relative classification and changes in the key financial figures in relation to the balance sheet, valuation and earnings.
- Policy: Is the dividend policy consistent over the long-term?
In addition to the Swiss blue chips, our global equities consist of companies from western countries that meet our high standards in terms of corporate governance, property rights, sustainability reporting, stock market infrastructure and political stability. The Swiss equity portfolio is supplemented by a limited proportion of exchange-traded Swiss small and mid caps. By tending towards an equal weighting instead of a capitalisation weighting - i.e. all positions are of roughly the same size – we achieve a more efficient risk diversification in equities and thus avoid concentration risks. We actively exclude chronically low-margin sectors and unsustainable stocks.
On the level of the individual securities, a rebalancing takes place periodically. This involves selective profit-taking in order to bring the size of the positions back into the direction of the aforementioned equilibrium. Entire positions are sold if we determine, based on fundamental factors, that we no longer wish to invest in a particular company in the future.
In terms of bonds, we aim to have a portfolio of high-quality securities diversified in terms of borrower types. These are both corporate bonds and bonds issued by public-sector borrowers. Due to these quality and security considerations, we refrain from perpetual, subordinated or hybrid bonds and do not hold convertible bonds or "high-yield bonds". Because the bond component is intended to bring security and stability to the portfolio, we do not compromise on quality due to conviction. Furthermore, we do not only rely on the official credit ratings, but also carry out our own debtor assessment based on various key figures:
- Balance sheet quality (for example adjusted equity ratio, liquidity ratio, outstanding debt)
- Earnings power (for example EBIT, operating cash flow/sales)
- Solvency (simulated debt interest rate of 5% related to operating cash flow)
In addition, we perform peer group comparisons of the relevant bonds and monitor the yield to maturity for movements that are not induced by changes in interest rates or maturity, which may provide an indication of changes in quality. Ideally, we hold bonds that have been subscribed or purchased until maturity.