Stoxx, a provider and creator of European equity indices, has launched the Euro Stoxx 50 Risk Control 20% Index.
According to Stoxx, the new index measures the performance of a hypothetical portfolio which aims to control the risk of the underlying Euro Stoxx 50 Index.
The portfolio consists of an investment into the Euro Stoxx 50 Index and the money market (EONIA). To achieve risk control, the asset allocation is shifted between the two investments, targeting a risk of 20%.
The Euro Stoxx 50 Risk Control 20% Index replicates a portfolio that allocates varying investments into the Euro Stoxx 50 Net Return Index and into the money market as measured by EONIA.
The exposure to the underlying Euro Stoxx 50 Index can be adjusted from 0% to 150% to meet the targeted risk of 20% for the portfolio. If the expected risk, which is measured by the VStoxx, steadily exceeds the target risk level, the portfolio’s exposure to the Euro Stoxx 50 Index is decreased and that to the EONIA investment increased respectively.
If the expected risk falls below the targeted risk level, the portfolio will be adjusted towards the Euro Stoxx 50 Index, but only until a maximum exposure of 150% towards the underlying index is reached, said the company.
Stoxx CEO Hartmut Graf said that with the launch of this index, the company is offering market participants a tool to combine equity investing with risk control, based on Europe’s leading equity index.