Dutch financial services company ABN Amro is launching what it describes as a ground-breaking set of alpha-focused equity investment indices that aim to out-perform, with lower volatility, traditional global indices.
According to ABN Amro, its Alpha Indices will set a new benchmark and achieve risk-adjusted out-performance against traditional equity indices. This performance is achieved by taking exposure to markets during month-end and holiday periods when investors reduce risk. At all other times, cash will be invested at money market rates.
The new indices use an approach that would have consistently produced superior risk-adjusted returns compared to outright investments in the best known global equity indices for the last 20 years or more, ABN Amro said.
Market timing effects have been written about since the 1970s and have been shown to be effective in enhancing returns. ABN Amro’s extensive research, verified by Standard & Poor’s, shows that the Alpha Indices have much lower risk than the equity market indices such as the DAX, Dow Jones Industrial Average, FTSE 100 and Swiss Market Index – while having similar or better returns.
Juergen Bulling, head of commercial clients – private investor products at ABN Amro, said: The combination of exposure to indices on specified days around month end and holidays and income from deposits leads to superior results and efficient deployment of capital. It also results in lower risk.