Why S³ exists.
S³'s mission is to make more advanced systematic solutions accessible to Swiss investors.
Systematic instead of discretionary
Many decisions are, at their core, optimization problems that can be solved more robustly and sustainably through a systematic process. Explicitly defining the objective function (what should be maximized or minimized?) and the constraints (which other parameters need to be taken into account?) leads to more clarity compared with discretionary decisions, which rely primarily on past experience and current emotions. The resulting optimization can be simpler, depending on the subject (time, cost), or mathematically more complex and demanding (portfolio). Once defined, however, the solution can be repeated as often as needed, simply and consistently, something that is barely possible with discretionary decisions.
Systematic solutions are particularly effective when it comes to financial decisions. The reason is structural: systematic approaches eliminate behavioral biases and enable consistent execution across market cycles. This is why S³'s main focus is on systematic strategies and outsourced portfolio optimization.
Passive is not the only answer
In systematic strategies, the available offering today consists primarily of passive index funds/ETFs. These are cost-efficient and outperform most discretionary managers over the long term.1 However, market-cap-weighted indices ignore factor premia, and the lack of portfolio optimization can lead to concentration risk. Even the S&P 500, the world's best-known "passive" index, could arguably be constructed better.2
Advanced systematic equity strategies combine different factors into a robust portfolio that is rebalanced regularly. This creates the opportunity for better risk-adjusted returns over the long term. In multi-asset strategies too, regular portfolio optimization can be used to dynamically capture opportunities and systematically manage risk.
Advancing systematic solutions
Advanced systematic solutions are still not widely established today. Unlike passive ETFs, understanding is often lacking, there is less real-world evidence, and implementation is more demanding.
Through collaboration with specialized partners and its own solutions such as outsourced portfolio optimization, S³ helps more advanced systematic solutions find their way to Swiss investors. S³ also offers further services for asset owners, asset managers and start-ups.