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Benchmark-oriented approach QSS

The Quantitative Stock Selection (QSS) investment approach is a comprehensive, systematic stock screening process for exploiting market inefficiencies or stock mispricing based on publicly available and audited corporate information.

QSS methodology allows a reliable differentiation between efficient and inefficient markets and informs us which markets lend themselves to active stock selection and where passive indexing is to be preferred.

Proprietary model

The Quantitative Stock Selection investment approach is unique in Switzerland. It has four key advantages over other quantitative or traditional approaches:

  1. Systematic screening of the entire equity universe and evaluation according to over 120 factors, without using return forecasts.
  2. Use in measurably inefficient markets only – passive coverage of efficient markets
  3. Rule-based but dynamic application – ensuring the effectiveness of the factors at every stage of the economic cycle.
  4. Focused use of the risk budget – no residual risks, as sectors, countries and currencies have a neutral weighting relative to the benchmark.

The factors used can be grouped into the following six categories, which we call «styles»:

StyleDescription
Earnings Revisions
  • Revisions by analysts in relation to the expected profit, cash flow, revenue and dividends over different periods
  • Price Momentum
  • Chart-based factors such as price momentum and its development over different periods
  • Risk
  • Correlation between a stock and the overall market (beta) and volatility figures in relation to share price, historic earnings trend, and range of analysts’ estimated earnings, among other things
  • Quality
  • Balance sheet and profitability figures such as debt or return on equity, margins, and creditworthiness indicators
  • Growth
  • Historical and expected growth figures in relation to profit, revenue, cash flow and dividends, among other things
  • Valuation
  • Valuation metrics such as P/E, EV/EBITDA, PEG
  • Unique Selling Proposition

    Identification of inefficient markets

    By tracking over 120 factors, the QSS methodology can identify inefficient markets. Only here can structured active management achieve sustainable added value. Efficient markets, like the market for US or Japanese blue-chips, are covered in a global equities mandate (PARglobal) with cost-effective ETFs.

    • Benefit: Reduction in costs and avoidance of negative performance contributions.

    Effectiveness thanks to dynamic factor selection

    To evaluate equities, we only use factors in which investors differentiate between a low and a high ratio.

    • Benefit: The factors used are not fully factored in the current stock price and are therefore effective.

    Risk management thanks to dynamic weighting of the style groups

    The individual style groups are dynamically weighted based on an economic cycle model that is publicly available and supported by consensus data. As a result, portfolio risk is increased in the upturn stage of the cycle, as the risks that are taken are rewarded. In the downturn stage of the cycle, portfolio risk is reduced, as the risks that are taken are not rewarded.

    • Benefit: Smoothing of performance thanks to participation in rising markets and defensive positioning in falling markets.

    Focused use of the risk budget

    The portfolio is positioned to be neutral to the benchmark in terms of sectors, countries and currencies.

    • Benefit: Relative performance against the benchmark results entirely from stock selection.

    Flexibility

    We can also take a client’s individual preferences into account where requested. For example, equity portfolios can be created with low volatility, a high dividend yield and low-priced value stocks by giving the corresponding styles a higher weighting.

    Investment solutions »

    Contact

    Contact us by phone at +41 43 288 29 00 or email. You can also send us your request via our contact form. We'll be delighted to get in touch with you.

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    PARSUMO Capital AG is an asset manager of collective investment schemes, under FINMA supervision and member of the Swiss Association of Asset Managers (SAAM)
    PARSUMO Capital AG
    Förrlibuckstrasse 30
    CH-8005 Zurich
    Tel +41 43 288 29 00
    info@parsumo.com

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