They are sets of investment funds selected on the basis of different levels of risk or volatility. Each example consists of funds investing in different asset classes and markets.
To reduce the risk of your investment. Each example consists of funds that behave differently in different market situations, looking to balance return and risk, so that the return does not just depend on the performance of a single asset.
Normally, the greater the risk the greater the return and vice versa. Strategies that are riskier have more pronounced upward and downward movements, and those that can be considered "safer" potentially offer lower returns but also lower losses. Diversification reduces the risk while maintaining an adequate expected return.
It is a variable that measures the frequency and intensity of changes in the price of an asset or in the financial markets. This variable quantifies risk over a certain time interval.
It is a way of grouping instruments based on their characteristics and behaviour. At Openbank we show you these asset classes:
Liquidity and monetary assets.
Fixed income, comprised mainly of bonds.
Equity, composed mainly of shares listed on the stock exchange.
Real assets that are linked to the real economy and that provide greater diversification (real estate assets, bonds linked to inflation, raw materials and infrastructure).
There are many differences between passively managed funds and actively managed funds but one of the main ones is the cost to the investor: passively managed funds have lower costs than actively managed funds. This lower cost does not imply that, with the same strategy, they offer a higher return.
So that you can make a decision, let us tell you why this cost difference between the two management types exists:
Costs of passive management: these are low because passively managed funds replicate indexes and, using different techniques, this form of management can be inexpensive for the fund manager. For an investor it would be more difficult to create a diversified portfolio like that of an index and still have the low costs of a passively managed fund.
Costs of active management: actively managed funds try to beat their benchmark indexes, achieving a risk-adjusted long-term return, and to do this the managers must analyse the financial markets, build a vision of the future, bet actively against the indexes, etc., to try to anticipate the behaviour of the markets, exploit their inefficiencies and, thus, achieve a greater return.
When comparing the results of some funds with others, keep in mind that:
Passive management makes sense as a way to obtain the market beta (sensitivity to the movements in the benchmark index; for example, beta 1 means behaving like the indexes).
Active management makes sense as a way of obtaining a positive alpha (extra return between a fund and its index). Therefore, the important thing in active management is to consistently beat the benchmark index. This is possible for the leading managers in each asset class.
A benchmark index is the one against which you can compare your investment, in terms of return and risk, for both an instrument and a set of instruments. At Openbank we use the following ETFs as benchmark indexes for each asset subclass:
|Asset subclass||Benchmark index||ISIN|
|Money Market||iShares eb.rexx® Money Market UCITS ETF (DE)||DE000A0Q4RZ9|
|European Public Debt||iShares Core € Govt Bond UCITS ETF||IE00B4WXJJ64|
|Global Public Debt excl. Europe||iShares Global Govt Bond UCITS ETF||IE00B3F81K65|
|Corporate Fixed Income Investment Grade Europe||iShares Core € Corp Bond UCITS ETF||IE00B3F81R35|
|Corporate Fixed Income Investment Grade USA||iShares $ Corp Bond UCITS ETF||IE0032895942|
|Corporate Fixed Income High Yield||iShares Global High Yield Corp Bond UCITS ETF USD||IE00B74DQ490|
|Fixed Income Emerging Markets||iShares J.P. Morgan $ EM Bond UCITS ETF||IE00B2NPKV68|
|Equity Europe||iShares MSCI Europe UCITS ETF EUR||IE00B1YZSC51|
|Equity North America||iShares MSCI North America UCITS ETF||IE00B14X4M10|
|Equity Japan||iShares MSCI Japan UCITS ETF USD||IE00B02KXH56|
|Equity Pacific excl. Japan||iShares MSCI Pacific ex-Japan UCITS ETF USD||IE00B4WXJD03|
|Equity Emerging Markets||iShares MSCI EM UCITS ETF USD||IE00B0M63177|
|Real Assets Bonds linked to Inflation||iShares € Inflation Linked Govt Bond UCITS ETF||IE00B0M62X26|
|Real Assets Raw Materials||iShares Diversified Commodity Swap UCITS ETF (DE)||DE000A0H0728|
|Real Assets Infrastructures||iShares Global Infrastructure UCITS ETF USD||IE00B1FZS467|
|Real Asses Real Estate Market (shares)||iShares Developed Markets Property Yield UCITS ETF||IE00B1FZS350|
Given that the investment funds may not have sufficient historical data, the graphs have been calculated with historical data for the benchmark indexes for each of the asset subclasses. The source of the data is Thomson Reuters.
The Maximum Drawdown marks the maximum loss that the value of an investment fund can suffer in a given period of time. That is to say, it is the one that is recorded from an initial maximum ("peak") to a minimum ("valley"), being the recovery time the one that passes until the value of the fund exceeds the initial maximum.