VIVE wants you to achieve your goals by means of your investments. The investments and investment portfolios serve the realisation of your financial goals. VIVE's asset management for private clients provides the desired investments with an efficient return-risk ratio, at low costs, in a transparent manner and taking into account widely accepted ESG criteria (i.e. in the areas of environment, social relations and good corporate governance).
Socially responsible investing
VIVE believes that investing entails a responsibility that is broader than just a financial fiduciary duty; the effects on the environment, social relationships and good corporate governance (ESG) should therefore be an integral part of the investment strategy.
Integrating ESG criteria has added value from a risk/return perspective. Responsible investment includes a combination of:
In principle, VIVE only wants to select funds with an ESG policy that contains the above-mentioned policy components.
To evaluate the ESG integration in the funds, we look at the fund classification under the EU Sustainable Finance Disclosure Regulation (SFDR). The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of EU rules aimed at making the sustainability profile of funds more comparable and easier to understand for end investors.
Spreading risk and keeping costs low are important
VIVE believes that investing is best done through broadly diversified portfolios. VIVE strives to spread its investments as much as possible across investment categories, and within these categories across geographical regions and sectors. Avoidable risk that is not rewarded with a positive expected risk premium (excess return over the risk-free interest rate) should in principle be avoided.
VIVE does not believe that market timing and tactical asset allocation add value to the client after expenses. VIVE does not believe that trying to beat the market structurally adds value to the client after expenses. With active management, it is very difficult to outperform the market average. Therefore, the policy is to select funds on a 'passive where possible' basis. VIVE believes that active management makes sense for less efficient or inefficient markets if it leads to better risk management. VIVE's focus within portfolio management is on constructing portfolios by risk level as well as possible on the basis of realistic and plausible (long-term) economic scenarios. The investment horizon of clients runs from short to long term. By outsourcing to external asset managers, i.e. the suppliers of unlisted investment funds in which VIVE invests for its clients, VIVE can focus on the added value for you as a client. VIVE can select the investment funds itself. VIVE only invests via unlisted UCITS in the selected investment categories.
Focus on risk management
Risk management is crucial for sustainable asset management. This means that risk is measured frequently and the portfolio is adjusted if necessary. VIVE applies the principle that the downside risk value of the optimal portfolios is updated quarterly and that the composition of the optimal portfolios can be adjusted accordingly to achieve the best ratio between expected return and downside risk. To ensure that clients' investment plans remain close to the intended risk profile, VIVE monitors your investment portfolios on a daily basis and applies a rebalancing of the portfolios if they deviate too much from that risk profile. The actual composition is then brought in line with the strategic portfolio belonging to the investment plan at the moment of rebalancing.
The asset classes that qualify for the optimal portfolio should have a positive expected risk premium that is scientifically substantiated.
VIVE can fill the portfolios with the following investment categories on the basis of the investment convictions:
VIVE determines a representative index series for each category, which is used to determine the statistical characteristics in VIVE Technology's Economic Scenario Generator model. These characteristics determine the degree of risk diversification across categories.
VIVE offers asset management by means of investments in unlisted investment funds ('funds'). VIVE does not invest in own funds but uses funds of third parties; this prevents undesired conflicts of interest.
VIVE selects third party funds on the basis of the following criteria:
Liquid:
The portfolio is composed of unlisted open-ended mutual funds that are traded daily.
High degree of risk diversification:
There is a wide spread within the fund: there are sufficient names in each investment fund and it is ensured that no individual investment has an excessive allocation within the fund, both in terms of Euro weighting and risk weighting. This is tested by applying a 5% worst case scenario to the two largest positions in the portfolio and checking that they do not exceed the Value at Risk of the relevant asset class. If this is exceeded, the fund does not meet the risk diversification criterion and does not qualify for selection.
Low costs:
The ongoing cost factor (OCF) must be low. This is tested by comparing the OCF of a fund to be selected with the median OCF of comparable funds. The level of any entry or exit charge must be in line with the market.
The level of ESG:
VIVE believes that investing entails a responsibility that is broader than just a financial fiduciary duty; the effects on the environment, social relationships and good corporate governance (ESG) should therefore be an integral part of the investment strategy. Integrating ESG criteria has added value from a risk/return perspective. In principle, VIVE only selects funds with an ESG policy. If no fund with such an ESG policy is available for a specific investment category, VIVE may consider adding a fund that does not meet VIVE's ESG selection criteria if the improvement in the return-risk ratio for the client is significant. In this case, it will be specifically recorded and communicated to clients how VIVE's ESG policy starting point is deviated from and why VIVE considers it in the clients' interest that the fund in question can be part of clients' portfolios.
Appropriate Mandate of the Instrument:
The benchmark of the fund is in reasonable agreement with the representative index series on which the statistical characteristics are based; the tracking error between the two indices is not expected to exceed 1%. This concerns two index series. The index series on which the statistical characteristics are based refers to the index series used to determine the parameters in the Economic Scenario Generator model. The other index series, from the benchmark, refers to the fund's benchmark. The investment universe and risk limits contribute to sufficient risk diversification. In the case of an index tracker, the replication method ensures a good connection to the benchmark (e.g. full replication). The management style of the fund is passive and responsible where possible.
Good quality asset manager:
The asset manager has a proven track record (i.e. has demonstrated reliable asset management in the asset class concerned), has its own risk management in order and has a stable organisation. VIVE specifically states an ISAE 3402 certificate as a criterion. The stability of the organisation is checked, among other things, by looking at the staff turnover both of the organisation as a whole and within the group of policymakers.
Suitable and authorised for retail investors within the European Union:
The fund has UCITS status and the Key Investor Information Document (KIID) for the fund is available in English and in the language of the country where VIVE offers the app. This means that the EBI is available in the Dutch language for the funds that are used for clients in the Netherlands.
Funds with securities lending and unnecessary use of derivatives should be avoided:
VIVE has a strong preference for funds without securities lending and without the use of derivatives (such as total return swaps). VIVE considers the addition of counterparty risk by securities lending undesirable, as this is not a transparent source of risk for the client. The use of derivatives in a fund introduces additional risks that cannot be clearly understood by non-professional investors. If a fund without securities lending or derivatives use is not available for a specific asset class, but the improvement in the risk/return ratio for VIVE's clients is significant, VIVE may still consider adding this fund. In that case, it will be specifically recorded and communicated to clients in which way it deviates from VIVE's principle for securities and derivatives lending, and why VIVE considers it in the clients' interest that the fund in question can be part of clients' portfolios. Excluded are funds that use so-called exotics (custom derivatives).
VIVE helps clients set investment goals based on preferences specified by clients and within the client's risk tolerance profile. Through a software-defined process, an optimal investment strategy is then derived for each target plan. This strategy is a so-called lifecycle strategy: the 'investment risk decreases as the end date approaches'.
VIVE determines an optimal investment portfolio within the client's risk profile. VIVE provides portfolio optimisation and rebalancing after adjusting the risk/return characteristics of the underlying asset classes. The optimal portfolios and forecasts for the median scenario and the adverse scenario are based on an economic scenario set generated quarterly by the Economic Scenario Generator model.
The investment plans are implemented by investing, for each investment plan, in an optimal portfolio corresponding to the level of risk accepted by the client when creating the plan (or last revision of the plan). VIVE uses the same consistent portfolio optimisation to implement the investment mix in the different types of investment plans.
The portfolio optimisation with eligible asset classes is performed by selecting the portfolio with the highest expected return (median scenario) at each Value-at-Risk (VaR) level based on a realistic 1-year scenario. VIVE uses a robust optimisation technique to minimise the impact of outliers. The VaR level is determined as the 5% percentile of the probability distribution of portfolio returns.
Part of VIVE's services is the rebalancing of the portfolios in the investment plans created by the client. Differences between the actual portfolio and the strategic portfolio for the client's investment plan can arise due to price developments and changes in the strategic portfolio. The goal of rebalancing is to align the actual portfolio with the strategic portfolio that belongs to the specific investment plan at that time.