Efficient Investing in bonds

In standard indices bonds are weighted according to issuance volume. The higher an issuer’s debt, the higher its weight in the index. When indexing, the largest borrower is rewarded. This does not yield an optimally composed portfolio.

OLZ portfolio optimisation means clear focus on quality and efficient design of global bonds portfolios.

OLZ predicts the risk properties (volatilities, correlations) for each interest rate zone and derives an optimally diversified portfolio. The target portfolio is the ex-ante minimum variance portfolio.

Portfolio optimisation takes the individual risk factors into consideration. Focusing on best creditworthiness and highest liquidity minimises the counterparty risks (credit risks) and liquidity risks. Minimum variance optimisation leads to optimised diversification of interest rate risks. The currency risks are almost fully hedged effectively.

OLZ minimum variance optimisation is available as funds for a range of investment segments. Direct mandates with client-specific requirements and restrictions are available upon request.

Investment process

OLZ systematically follows a 3-step rule-based investment process without discretionary range for portfolio management.


How does optimisation work in the case of CHF bonds?

Minimum variance optimisation is not possible for CHF bonds due to the restricted liquidity and the heterogeneity of the universe. OLZ has therefore decided on semi-passive management and collaboration with an external specialist for CHF bonds. The manager is Loyal Finance AG in Zurich. Advantages: Systematic improvement of portfolio structure with respect to segments, creditworthiness and durations compared to the Swiss Bond Index AAA-BBB; Selection of bonds according to value criteria; Buy-and-hold strategy; Target duration: 5 years with a range of +/- 1 year (cf. SBI: ca. 6.5 years)