Dynamic weights
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This document explains the methodology of dynamic weights used in Saxo Bank's global value equity portfolio, detailing how replacements of stocks in the portfolio are handled through a systematic ranking and weighting system. It also addresses concerns about potential risks associated with high-weight stocks leaving the portfolio, asserting that their back-test results support the robustness of their approach. Furthermore, the document includes important disclaimers regarding the nature of the investment research, associated risks, and the independence of the research.
![March 11, 2011
NON-INDEPENDENT INVESTMENT RESEARCH
This investment research has not been prepared in accordance with legal requirements designed to promote the independence
of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment
research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or
otherwise be interested in the investments (including derivatives), of any issuer mentioned herein.
None of the information contained herein constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or
financial instrument, to make any investment, or to participate in any particular trading strategy. This material is produced for
marketing and/or informational purposes only and Saxo Bank A/S and its owners, subsidiaries and affiliates whether acting
directly or through branch offices (“Saxo Bank”) make no representation or warranty, and assume no liability, for the accuracy
or completeness of the information provided herein. In providing this material Saxo Bank has not taken into account any
particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and
nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank
assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All
investments entail a risk and may result in both profits and losses. In particular investments in leveraged products, such as but
not limited to foreign exchange, derivates and commodities can be very speculative and profits and losses may fluctuate both
violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their
financial situation and consult financial advisor(s) in order to understand the risks involved and ensure the suitability of their
situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any
risk may not be, and should not be considered to be, neither a comprehensive disclosure or risks nor a comprehensive
description such risks. Any expression of opinion may be personal to the author and may not reflect the opinion of Saxo Bank
and all expressions of opinion are subject to change without notice (neither prior nor subsequent).
This [website/communication] refers to past performance. Past performance is not a reliable indicator of future performance.
Indications of past performance displayed on this [website/communication] will not necessarily be repeated in the future. No
representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the
past, or that significant losses will be avoided.
Statements contained on this [website/communication] that are not historical facts and which may be simulated past
performance or future performance data are based on current expectations, estimates, projections, opinions and beliefs of the
Saxo Bank Group. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance
should not be placed thereon. Additionally, this [website/communication] may contain 'forward-looking statements'. Actual
events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking
statements.
This material is confidential and should not be copied, distributed, published or reproduced in whole or in part or disclosed by
recipients to any other person.
Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or
country where such distribution or use would be unlawful. The information in this document is not directed at or intended for
“US Persons” within the meaning of the United States Securities Act of 1993, as amended and the United States Securities
Exchange Act of 1934, as amended.
This disclaimer is subject to Saxo Bank's Full Disclaimer available at www.saxobank.com/disclaimer.
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Dynamic weights
- 1. March 11, 2011 Note on Dynamic Weights Peter Garnry Equity Strategist The aim of this note is to clarify how the dynamic weights pg@saxobank.com work in our Global Value Equity Portfolio. +45 3977 6786 The below tables are created from a fictive portfolio composing of five stocks (X1...X5) in period 1 with different starting values/weights. After period 1 a new screening and ranking of global stocks means that X3 and X5 go out of the portfolio and are replaced with stocks X6 and X7. The combined weight of the two stocks exiting the portfolio is 25.1 percent. These 25.1 percent are divided among X6 and X7 by their relative weights based on the combined score used to rank and select our portfolio after the monthly screening. In this fictive case the relative weights for X6 and X7 are 58.7 percent and 41.3 percent. Their weight start in period 2 is then 14.7 percent (0.251x0.587) and 10.4 percent (0.251x41.3). What if only one stock is leaving and has a high weight? This issue is important to address as it might raise concerns. Our view is this is insignificant because the 15 stocks that are selected have the highest quality relative to valuation. Our extensive back-test also shows that our scaling method is solid. Our approach is also reducing transaction costs as a high weight on one stock going out is not distributed on 10 different stocks. Source: own calculations
- 2. March 11, 2011 NON-INDEPENDENT INVESTMENT RESEARCH This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. None of the information contained herein constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. This material is produced for marketing and/or informational purposes only and Saxo Bank A/S and its owners, subsidiaries and affiliates whether acting directly or through branch offices (“Saxo Bank”) make no representation or warranty, and assume no liability, for the accuracy or completeness of the information provided herein. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses. In particular investments in leveraged products, such as but not limited to foreign exchange, derivates and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisor(s) in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure or risks nor a comprehensive description such risks. Any expression of opinion may be personal to the author and may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent). This [website/communication] refers to past performance. Past performance is not a reliable indicator of future performance. Indications of past performance displayed on this [website/communication] will not necessarily be repeated in the future. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. Statements contained on this [website/communication] that are not historical facts and which may be simulated past performance or future performance data are based on current expectations, estimates, projections, opinions and beliefs of the Saxo Bank Group. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this [website/communication] may contain 'forward-looking statements'. Actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. This material is confidential and should not be copied, distributed, published or reproduced in whole or in part or disclosed by recipients to any other person. Any information or opinions in this material are not intended for distribution to, or use by, any person in any jurisdiction or country where such distribution or use would be unlawful. The information in this document is not directed at or intended for “US Persons” within the meaning of the United States Securities Act of 1993, as amended and the United States Securities Exchange Act of 1934, as amended. This disclaimer is subject to Saxo Bank's Full Disclaimer available at www.saxobank.com/disclaimer. 2