Indices in the Fundo VLPP index family are constructed on the basis of the
thinking that underpinned the formulation of the LPP 2000 index family developed
by Pictet. The series of assets underlying both indices are the same, but
their weightings are different. Weightings are fixed in the LPP family of indices
whereas they become variable in the VLPP family.
To ensure volatility of the VLPP composite index matches the median volatility
of the corresponding LPP index, weightings for the various components are reassessed
at the end of each month. At times when markets are experiencing considerable
swings, the proportion in the most volatile components, in this instance
equities, is scaled down to offset the extra fluctuations that they are engendering.
This mechanism shifts into reverse during phases where markets are enjoying
Seeking to improve the risk/return trade-off
Controlling volatility and rebalancing asset classes according to shifts in risk
mean that the Fundo VLPP index can perform distinctly better than the Pictet
LPP 25 and LPP 40 benchmark indices, with volatility reduced by around 25%.