Solactive and Panthera Solutions are launching the Solactive Panthera World Market Portfolio Index, which seeks to replicate the global market portfolio as measured by Monaco-based asset allocation consultancy Panthera Solutions through a multi-asset indexing strategy.
Specifically, the index is composed of ETFs and minor cash positions tracking the performance of 11 asset classes.
In 1964, William Sharpe postulated that the market portfolio was the natural starting point in portfolio construction. More than 50 years later and after three years of research, Panthera Solutions, with the goal of providing a representative, broad-based benchmark for multi-asset investing, developed a framework to measure the Global Capital Stock, considering both financial and non-financial investable assets (Working Paper download: here). The Global Capital Stock for investors is acting as an academically sound proxy for the global market portfolio.
Their research has resulted in a global market portfolio organised into 11 asset classes, each weighted in proportion to the respective market capitalisations. These include public equities, government securities, financial institutions bonds, non-financial corporate bonds, securitised loans, non-securitised loans, cash equivalents, cash, real estate, land and private businesses. The components of the Solactive Panthera World Market Portfolio Index are selected based on their ability to track as closely as possible each asset class and represent the underlying market properly.
The Solactive Panthera World Market Portfolio Index can be used as a benchmark against which to compare the performance of multi-asset portfolios. Equally, it can be employed to analyse the relative performance of each asset class through time. In addition, it can act as the parent index of active strategies or as the foundation on which to build investment products such as ETFs.
Steffen Scheuble, CEO of Solactive, says: “Most benchmark solutions for multi- asset strategies have typically focused on traditional financial assets, thus overlooking non-financial ones. The consequence is a partial picture of asset holdings globally. In order to fill the gap, Panthera Solutions and Solactive have come up with a proxy for the global asset market taking into account both financial and alternative assets. This is captured by the Solactive Panthera World Market Portfolio Index, which can be considered as one of the most representative and least biased benchmarks for multi-asset investing in the market so far.”
Markus Schuller, Managing Partner at Panthera Solutions, says: “In recent years, multi- asset investing became increasingly popular. In Europe alone, more than 14.000 multi- asset funds are offered. Evaluating their asset allocation quality with traditional risk measures or non-representative benchmarks has proven to be insufficient. The Solactive Panthera World Market Portfolio Index offers the very first representative benchmark for multi-asset strategies as it is based on the Global Capital Stock.”
The Solactive Panthera World Market Portfolio Index is calculated as a price return, net total return and gross total return index. The index is published in USD. As of the launch date, the index was composed of 78 ETFs. The asset classes are represented by a minimum of 2 ETFs up to 47. The weight of each asset class is proportional to the market capitalisation of other asset classes. Similarly, the weight of each ETF covering a specific asset class is proportional to its market capitalisation within that asset class. The index is rebalanced monthly.