When it comes to investing in the Swiss stock market, many investors automatically turn to familiar indices like the SMI or SPI. However, these indices may not be the most effective way to gain exposure to the Swiss economy. The SMI, for example, only includes 20 stocks and is heavily weighted towards the healthcare and finance sectors, while the SPI, despite having 205 stocks, overweights the same industries but increases risk by including many small to mid-sized companies. While they sound like they should represent the Swiss economy, they only include companies based on size and liquidity criteria.
The Obermatt Swiss Pearls Index (OMSP1) offers a different approach. Designed to provide a more accurate reflection of the Swiss economy, the OMSP1 selects 36 high-quality Swiss stocks based on a comprehensive 360° View methodology. It considers not only a company’s size but also its value, growth potential, financial security, and market sentiment rankings. By incorporating these factors, the OMSP1 aims to identify companies that are not only financially sound but also poised for future growth relative to its market peers.
Unlike the SMI and SPI, which primarily rely on market capitalization and liquidity, the OMSP1’s focus on quality and performance leads to a more balanced and diversified portfolio. This approach has historically resulted in better risk-adjusted returns, as evidenced by the OMSP1 outperforming the SMI in 11 out of 12 months in a recent period. Furthermore, the OMSP1 has demonstrated greater resilience during market downturns, offering investors a smoother ride.
The OMSP1’s commitment to transparency and active management further distinguishes it from other indices. The OMSP's composition is adjusted monthly to ensure it remains dynamic and responsive to market shifts. This contrasts with the static nature of the SMI and the less transparent selection process of the SPI and SLI. Transparency is another defining feature of the OMSP1, and we publicly communicate all trades and portfolio changes, empowering investors with clear insights into the index's composition and strategy. This openness stands in contrast to the more proprietary nature of information surrounding some traditional indices.
The Swiss Market Index (SMI) was created in 1988 so that Swiss Bank Corporation (SBC) Warburg could bring structured products to market. For many years, the SMI fluctuated between 18 and 29 equities. For ease of handling, banks decided in 2007 to fix the number of equities in the SMI at 20, a number that isn’t optimized for investors but for convenience.
In contrast, the Obermatt Swiss Pearls Index (OMSP1) was created with investors in mind to offer a compelling investment solution for those seeking a diversified and representative exposure to the true Swiss stock market. As we know from Toblerone, just because something is synonymous with Switzerland, doesn’t mean that it really is.