Investment

Chart of the Month – How to assess the risk of an equity portfolio today?

by Cedric Dingens

How to assess the risk of an equity portfolio today?

Source : Cantillon, FactSet

Calculating the beta has traditionally been a good way to assess the risk associated to a stock in a portfolio. The beta measures the sensitivity of the stock price to a market index. The higher the beta, the higher the amplitude of the stock price with the market on both long and short sides. In theory, having a portfolio of low beta stocks should protect you more in terms of downside during a market correction.

The issue is that, as shown in the table above, the 5 Year Trailing Beta for most sectors has significantly changed over the last 3 years. With technology disruption in action in almost all parts of the economy, some companies which belong to defensive sectors are now more vulnerable with less strong barriers to entry. Healthcare and Consumer Staples have seen the highest increase in terms of beta whereas Telecommunication Services appear as among the less risky sectors to invest in today!

The reality is that beta is only one statistic to look at and other parameters like factors and styles have more explanatory power to performance today. Momentum was the best performing factor by far until the last quarter of 2018 which saw a huge reversal. To make the story even more complex, the beta of factors are also less stable over time and record factor correlation explains the poor returns of quantitative and risk premia managers last year.

At Notz Stucki, we are well aware of factor exposures and correlations when managing our equity portfolios. But the first question we ask ourselves when we analyze a company is do we want to own this business and is it able to generate good long-term compounding returns over the years.

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Antonio Mira
CHIEF FINANCIAL OFFICER, MEMBER OF THE EXECUTIVE COMMITTEE

Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

Sébastien Poiret
DEPUTY HEAD OF WEALTH MANAGEMENT

Sébastien Poiret joined NS Partners in 2008 and manages funds of hedge funds and private client mandates. He also oversees the development of the Group’s offices in Mauritius.

Prior to joining NS Partners, he served as a Trader, Head of Manager research and Portfolio Manager in the USA and Switzerland for a single hedge fund (1998-2004) and for Optimal (2004-2008), Grupo Santander’s fund-of-hedge funds operations.

Sébastien holds a Bachelor’s degree in Corporate Finance from the ESPEME Business School (EDHEC Group) and an MBA in Finance and Economics from the Institute of Business Administration, both in Nice.

Abir Oreibi
BOARD DIRECTOR

Abir Oreibi joined the Board of the NS Partners Group in 2018, where she brings her truly international perspective and rich experience.
Among many other ventures, Abir set up Alibaba.com’s first European office. After living and working in Shanghai, Hong Kong, Bangkok and London, she now lives in Geneva, where she is CEO of Lift Events, an organization that identifies technology trends, their business and social impact through the organization of events and open innovation programs. Issues related to the challenges and opportunities created by new technologies as well as the strategic responses from organizations are at the heart of Lift’s activities.
Abir holds a BA in Political Sciences from the University of Geneva. She is an investor, and member of advisory and innovation boards.

Romain Pidoux, CAIA

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Romain Pidoux joined NS Partners in 2011 and heads the Group’s Risk Management.
He started his financial career in 2005 as Head of Quantitative Analysis for a Swiss Family Office, selecting funds and managing portfolio allocation. In 2008, he switched to the alternative world and joined Peak Partners as hedge funds analyst.
He is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in international relations from the Graduate Institute of International Studies at Geneva University.

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