BEL20 Index is not built to perform (De Tijd)
The Finvex Group has recently been quoted in ‘De Tijd’ (Belgian reference financial newspaper) in the ‘Money & Investing’ section.
The article, part of a specialised ‘Week of investing’ theme, addressed the structural weakness of the Belgian BEL 20® index. It quoted the founders of the Finvex Group who were questioning the basic principles behind market capitalisation weighting of benchmark indices. Mostly, Finvex argues that market capitalisation based indices neither perform well, nor do they reduce the risks of investing in equities. The partners went on demonstrating their point by simply weighting the Belgian benchmark index equally.
The ultimate investment technique utilises a model developed in conjunction with Professor Hübner of HEC-ULg and the specialised financial risk software developer, Gambit. Finvex Group showed the results of such a risk controlling model applied to the Belgian equity universe, by continuously selecting 10 stocks during the last 10 years. The resulting BEL10 index would have registered a 4.04% return p.a. while the BEL20® index had only performed -1.95% p.a. Furthermore, the benchmark index was relatively risky with its 21% volatility while the BEL10 reduced the volatility to 2/3 of the benchmark volatility.
The model allows to construct stable portfolios and indices in most investment universes and asset classes.