Tracker+ ESG Family

A sustainable approach to index tracking.

why choose a Tracker+ ESG?

  • Substantial reduction in the carbon footprint and other extra-financial risks of the portfolio, without political or ethical bias. 
  • Reduction in reputational risk for investors by reducing exposure to companies with severe controversies and stranded assets without compromising the benchmark return. 
  • Implementation of a index tracking strategy through funds dedicated to and optimized for Swiss pension funds..

sustainability.

Lombard Odier has a long heritage of sustainable investing. We have spent the last 20 years analysing business practices, and have developed a proprietary ESG methodology. Our proprietary Consciousness, Action and Results (‘CAR’) tagging system, which we introduced more than a decade ago, sorts 115 data points to better differentiate between the talkers, do-ers and the real achievers to give us a deeper understanding of genuine corporate sustainability and transition.
 

our approach.

 

Based on
115
datapoints
Covering up to
99.8%
of an index
Maximum 
0.5%
ex ante tracking error 

 

To reduce a portfolio’s risk level while staying very close to the benchmark index, we proceed in three stages:


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1

Exclusions

Securities of companies active in the controversial weapons sector incompatible with Swiss legislation or in contradiction with international treaties signed by Switzerland are  excluded from the investment universe (less than 10, alongside the ASIR/SVVK recommendation list as well as LOIM exclusion list). 

2

Risk reduction

In the remaining universe, companies involved in scandals or in controversial activities are  underweighted, as are the securities of companies whose asset values are at risk due to changes in environmental regulations, in particular thermal coal (stranded assets).  

3

ESG adjustment

The remaining companies are classified according to their ESG-CAR score and their carbon intensity. The best are overweighted and the worst underweighted. Our approach favours companies that deliver tangible results in terms of sustainability (‘Results’ in CAR) and avoid the greenwashing trap. 

Based on their ESG-CAR score, the securities of companies that are below the median are then gradually underweighted, until they reach a maximum deviation of -0.15% for equities, and -0.30% for bonds. Securities from companies with a score higher than the median are gradually overweighted (maximum 0.15%, resp. 0.30%) while monitoring the tracking error ex ante, which may not exceed 0.50%.

This management approach allows a reduction in exposure of the portfolio by: 

  • nearly 50% to the most controversial companies (more than 60% for corporate bonds) 
  • more than a third to the carbon intensity of the benchmark index 
  • approximately 70% to stranded assets (more than 90% for corporate bonds)

 

Without otherwise deviating from the risk/reward characteristics of the benchmark index and without sectoral or regional bias. Other risk indicators remain very close to the index, including the tracking error.

 

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For illustrative purposes only. Positions and/or allocations can change. Source: Lombard Odier. Data as at 31 December 2018, ESG score. Source: Lombard Odier.

 

opportunities.

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  • Without substantially modifying the profile of the benchmark index, investors can significantly reduce their exposure to short-term and long-term extra-financial risks
  • Expected return stays very close to that of the underlying Index1
  • Potentially reduce the portfolio’s carbon intensity and exposure to activities related to thermal coal and stranded assets
  • Sector and regional exposure per benchmark; no significant factor bias
  • Quantitative approach based on a well-established process and a strong infrastructure
  • Proprietary ESG-CAR model and database going back to 2009, allowing a detailed understanding of changes to companies’ ESG practices, avoiding the pitfall of greenwashing

risks.

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  • As the portfolio tracks the benchmark index, the risk profile is that of the latter and may be subject to significant fluctuations in the value of the underlying securities and currencies
  • The performance of the portfolios is expressed in CHF, but some funds might not be hedged against exchange rate risks
  • The use of derivatives is allowed in order to optimise management, which may lead to additional counterparty risks
  • The integration of ESG principles and reduction of carbon footprint can vary over time
  • Exposure to companies involved in public scandals will only be reduced once the controversy level has been confirmed by our provider, resulting in a potential delay between the reduction of the exposure and the move in the price of the security

funds in the Tracker+ ESG Family.

 

Name

Benchmark index

Global Equities Tracker+ ESG

MSCI World ex Switzerland

Global Bonds Corporate Tracker+ ESG

Bloomberg Barclays Global Aggregate Corporate ex-CHF

 

contacts.

 

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Laure Bolliger Pietri
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Olivier Bluche

 

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Eric Roeleven
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Nicole Crettenand

important information.

1 Expected returns are estimates of hypothetical average returns of economic asset classes derived from statistical models. There can be no assurance that these returns can be achieved. Actual returns are likely to vary.

The fund has not yet been launched. If such a strategy is offered it may be offered under a different name and under different terms and would be subject to legal and regulatory approvals. The information contained herein is subject to completion and amendment.

FOR QUALIFIED INVESTORS ONLY.
This document is issued by Lombard Odier Asset Management (Switzerland) SA, a Swiss-based management company, having its registered office at 6, av. des Morgines, 1213 Petit-Lancy, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).
Lombard Odier Investment Managers (“LOIM”) is a trade name.
The fund mentioned in this document (hereinafter the “Fund”) is a Swiss contractual fund. The Fund is authorised and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”) as another fund for traditional investments within the meaning of the Collective Investment Scheme Act of 23 June 2006, as amended. The management company of the Fund is Lombard Odier Asset Management (Switzerland) SA (hereinafter the “Management Company”), a Swiss-based public limited company (SA), having its registered office at 6, av. des Morgines, 1213 Petit-Lancy, authorised and regulated by FINMA. The Fund will not be, nor will its shares be, registered for public offering in any jurisdiction. This document is not a recommendation to subscribe to and does not constitute an offer to sell or a solicitation or an offer to buy the Fund’s shares, nor shall there be any sale of the Fund’s shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. Consequently, the offering of the Fund’s shares may be restricted in certain jurisdictions. Prospective investors must inform themselves of, and observe, such restrictions, including legal, tax, foreign exchange or other restrictions in their relevant jurisdictions. Neither this document nor any part of it shall form the basis of, or be relied on in connection with, any contract to purchase or subscribe to the Fund’s shares. Any such acquisition may only be made on the basis of the official documents of the Fund, each in their final form. The prospectus and fund contract, the Key Investor Information Document, and the most recent annual and semi-annual reports are the only official offering documents of the Fund’s shares (the “Offering Documents”). They are available on http//:funds.lombardodier.com or can be requested free of charge at the registered office of the Fund or of the Management Company, or from the distributors of the Fund. An investment in the Fund is not suitable for all investors. Making an investment in a Fund is speculative. There can be no assurance that the Fund’s investment objective will be achieved or that there will be a return on the capital. Past or estimated performance is not necessarily indicative of future results and no assurance can be made that profits will be achieved or that substantial losses will not be incurred. This document does not contain personalised recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before making an investment in the Fund, an investor should read the entire Offering Documents, and in particular the risk factors pertaining to an investment in the Fund, consider carefully the suitability of such investment to their circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified or used for any other purpose without the prior consent of LOIM. It is not intended for distribution, publication or use in any jurisdiction where such distribution, publication or use would be unlawful. This document contains the opinions of LOIM as at the date of issue. The information and analysis contained herein are based on sources that are believed to be reliable. However, LOIM does not guarantee the timeliness, accuracy or completeness of the information contained in this document, nor does it accept any liability for any loss or damage resulting from its use. All information and opinions may change without notice. The contents of this document are intended for persons who are sophisticated professional investors and who are either authorised or regulated to operate in the financial markets or who have been vetted by LOIM as having the expertise, experience and knowledge of the investment matters set out in this document and in respect of whom LOIM has received an assurance that they are capable of making their own investment decisions and understanding the risks involved in making investments of the type included in this document or other persons that LOIM has expressly confirmed as being appropriate recipients of this document. If you are not a person falling within the above categories, you are kindly asked to either return this document to LOIM or to destroy it and are expressly warned that you must not rely upon its contents or have regard to any of the matters set out in this document in relation to investment matters and must not transmit this document to any other person. Neither this document nor any copy thereof may be sent, taken into or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term “United States Person” shall mean any citizen, national or resident of the United States of America, partnership organised or existing in any state, territory or possession of the United States of America, a corporation organised under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Sources: Unless otherwise stated, figures are prepared by LOIM.
Any benchmarks/indices cited herein are provided for information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe of a fund. The performance of a benchmark shall not be indicative of past or future performance of any fund. It should not be assumed that the relevant fund will invest in any specific securities that compromise any index, nor should it be understood to mean that there is a correlation between such fund’s returns and any index returns.
If the funds are denominated in a currency other than that in which the majority of the investor’s assets are held, the investor should be aware that changes in rates of exchange may affect the value of the funds’ underlying assets. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
The strategy may include the use of derivatives. Derivatives often involve a high degree of financial risk because a relatively small movement in the price of the underlying security or benchmark may result in a disproportionately large movement in the price of the derivative and are not suitable for all investors. No representation regarding the suitability of these instruments and strategies for a particular investor is made.
The views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice. LOIM does not provide accounting, tax or legal advice.
No part of this document may be (i) copied, photocopied or duplicated in any form or (ii) distributed to any person other than an employee, officer, director or authorised agent of the recipient without the prior consent of Lombard Odier Asset Management (Switzerland) SA. In Switzerland, this document constitutes a financial promotion and has been approved by Lombard Odier Asset Management (Switzerland), subject to the regulation and supervision of the Swiss Financial Market Supervisory Authority (FINMA).
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