Risk-averse investors have a choice. Either they invest in a portfolio with a high proportion of bonds and a low equity allocation. Or they remain invested (without additional risk) in a portfolio with a higher equity allocation, which is hedged using a collar strategy. As a reminder: a collar consists of buying a put option and selling a call option. With this option strategy, a framework or "collar" is placed around the existing equity position.
With our protection strategy, which is always applied as standard in our Swisscanto protection funds, investors also benefit from further advantages. As a by-product of hedging, there is an increase in sustainability (see chart below):
1. Sale of non-sustainable securities
While the active Swisscanto portfolios only contain securities that meet a certain sustainability standard (Responsible or Sustainable), an (equity) index also contains non-sustainable positions. In the S&P 500 Index, almost 5% of securities fall under Swisscanto's exclusion criteria. These are companies that produce cluster bombs and ammunition, have child labour in their supply chains or extract coal, for example. The collar creates a short position on the index and thus synthetically reduces the equity allocation. Consequently, the non-sustainable securities are sold without them being in the portfolio.