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Trackers up

15 March 2014, La Libre Entreprise

It is possible to manage your portfolio actively based on index-linked products.

Index-linked management offers numerous advantages. The principle consists of investing through passive funds, the so called trackers (ETFs), i.e. by using products that simply follow stock market indices. As these funds are not managed actively, the management fees are considerably less than funds which are managed actively. They also track the markets very closely, which makes them highly transparent: investors know the composition of their portfolio at all times. There are no entree fees for ETFs and they are highly liquid. These funds can be added to the composition of a portfolio and it is possible to diversify the portfolio solely on the basis of trackers. At the moment there are more than 4000 trackers, so this enables investors to achieve a good level of diversification. It also means it is entirely possible to manage a portfolio actively based on index-linked products.

“The asset allocation in a portfolio can generate up to 90% of performance,” explains Charles de Saligny, portfolio manager at Wealtheon, a management company that places index-linked management at the heart of its portfolios. “Once the allocation of assets has been defined, we can invest in general indices as well as make more targeted geographical sector-specific selections. By using trackers, we can easily get into – or out of – a specific sector or geographical area. As the name suggests, trackers enable us to closely track the market, geographical area or sector selected. We can also make more specific market wagers, on Australia for example, which is a anti-cyclical market.” [...]

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