Rodex Risk Advisers have developed an asset allocation index for clients in collaboration with Zurich Kantonalbank, the ZKB Dynamic Asset Class Index [DACI].
The index allows for long and short positioning in equities and government bonds. In commodities, only long positions are permitted.
The index was tailor-made for the main client. For example, one insurance company requires an index for their unit-linked insurance products. The client formulated the following restrictions:
- Index to be rule-based / quantitative
- Rebalancing only once per month
- Investment in futures only
- Insurance company specifies asset classes [e.g., equities, commodities, bonds] and allowed directionality [long and short]
- Soft commodities to be excluded for ethical reasons
Based on these specifications, Rodex developed and proposed several models. The models were discussed with the client. An active dialogue ensures that the resulting index was tailor-made for the client.
The ZKB Dynamic Asset Class Index is an excess return index denominated in CHF. The index is based on quantitative trend-following models and is subject to a risk control mechanism in terms of return volatility. For example, target volatility of the ZKB Dynamic Asset Class Index is calibrated to a level of 9% p.a. The index is implemented with highly liquid futures, therefore daily liquidity is available. The ZKB Dynamic Asset Class Index targets positive, absolute returns independent of the market environment. Daily index values can be viewed on Bloomberg “ZKBIDACI Index”. Zürcher Kantonalbank are issuing structured products on the index, for example, index trackers and capital-protected notes with Asian participation. A brochure on the ZKB DACI in English is here.
The weight allocation of the DACI constituents with a delay of six months can be downloaded here as CSV-file.