iBasket X-Ray
Precision Risk Control
Asset Allocation

The bubble chart below shows the returns over a one-year period against the volatility over the same period for the different ETFs in the iBasket.
ETFS Physical Gold UBS ETF - Barclays USD Emerging Markets Sovereign UCITS ETF hedged to GBP A-dis iShares $ TIPS UCITS ETF iShares £ Index-Linked Gilts UCITS ETF iShares US Property Yield UCITS ETF db x-trackers MSCI Brazil Index UCITS ETF db x-trackers Harvest CSI300 INDEX UCITS ETF (DR) Amundi ETF MSCI Eastern Europe ex Russia iShares Core MSCI Emerging Markets IMI UCITS ETF iShares Global Infrastructure UCITS ETF db x-trackers JPX-Nikkei 400 UCITS ETF UBS ETF - MSCI Canada UCITS ETF DBX DAX UCITS ETF iShares EURO STOXX Mid UCITS ETF UBS ETF - MSCI EMU 100% hedged to GBP UCITS ETF (GBP) A-dis Vanguard FTSE Developed Europe Ucits ETF Powershares EQQQ Fund SPDR® S&P 400 US MID CAP ETF SPDR® S&P US Dividend Aristocrats ETF iShares Dow Jones Industrial AverageSM UCITS ETF Cash - Sterling
Risk Indicators

A heightened risk in the markets is often a sign of a subsequent downturn in the economy. If the risk in the markets is high, one tends to reduce the exposure to risky assets in the portfolio and increase the exposure to safer assets like government and inflation-linked bonds. The higher the risk level, the higher the scorecard for any of the safer, low risk ETFs and vice-versa for the more risky ETFs.

A level of around 20% for the VIX and the VSTOXX can be seen as a neutral risk level. Values lower than that are considered as low risk. During the global financial crisis the values of the VIX and the VSTOXX went up to 81% and 88%, respectively. While the level of the VIX and the VSTOXX gives a good indication of the current riskiness in the markets, one also looks at the current trend in these values to determine whether the riskiness is increasing or decreasing.
TickerTickerTERAsset ClassSub-Asset ClassRegion
Cash - SterlingCash_GBP0CashGBP CashEurope
ETFS Physical GoldPHAU39CommodityPrecious MetalsGlobal
db x-trackers Harvest CSI300 INDEX UCITS ETF (DR)RQFI65EquityBroad MarketEM-Asia Pacific
UBS ETF - MSCI EMU 100% hedged to GBP UCITS ETF (GBP) A-disUC5933EquityCountryEurope
Powershares EQQQ FundEQQQ30EquityCountryNorth America
db x-trackers MSCI Brazil Index UCITS ETFXMBR65EquityCountry Fund-BrazilBrazil
UBS ETF - MSCI Canada UCITS ETFUB2333EquityCountry Fund-CanadaNorth America
DBX DAX UCITS ETFXDDX9EquityCountry Fund-GermanyGermany
iShares Dow Jones Industrial AverageSM UCITS ETFCIND33EquityCountry Fund-U.S.U.S.
iShares Core MSCI Emerging Markets IMI UCITS ETFEIMI25EquityEmerging Market EquityEM-Global
SPDR® S&P US Dividend Aristocrats ETFSPYD35EquityIncomeNorth America
db x-trackers JPX-Nikkei 400 UCITS ETFXDNS20EquityJapanJapan
Vanguard FTSE Developed Europe Ucits ETFVEUR12EquityRegionEurope
iShares EURO STOXX Mid UCITS ETFDJMC40EquityRegionEurope
SPDR® S&P 400 US MID CAP ETFSPY430EquityRegionNorth America
Amundi ETF MSCI Eastern Europe ex RussiaCE920EquityRegion Fund-Eastern EuropeanEastern European
iShares US Property Yield UCITS ETFIUSP40EquityREITsNorth America
iShares Global Infrastructure UCITS ETFINFR65EquityThemedGlobal
UBS ETF - Barclays USD Emerging Markets Sovereign UCITS ETF hedged to GBP A-disSBEG47Fixed IncomeGovernment BondsEM-Global
iShares £ Index-Linked Gilts UCITS ETFINXG25Fixed IncomeInflation BondsEurope
iShares $ TIPS UCITS ETFITPS25Fixed IncomeInflation BondsNorth America
Macro-Economic Indicators
We believe that an evidence based approach to portfolio construction is the best framework by which to seek enhanced returns under a backdrop of ever changing economic conditions. One technique we use is to screen the potential ETFs in a portfolio according to the prevailing macro-economic conditions and other leading market indicators. Of particular interest are the OECD and PMI data published monrthly, along with the VIX and VSTOXX.

The Benefits of Double Diversification
The double diversication properties of a portfolio of ETFs is a key aspect of our portfolio construction process. An ETF itself is diversified. For example the FTSE 100 has no idiosyncratic risk - if one company were to go down by 50%, the FTSE 100 would, all else being constant, on average only be down by 0.5%. A portfolio of ETFs is doubly diversified as we take into account the correlation properties of the different ETFs. Assets that are low or negatively correlated with each other allow one to build portfolios with lower risk for the same level of returns - or larger returns for the same level of risk.
Asset x Asset - Correlation over full period CINDSPYDSPY4EQQQVEURUC59DJMCXDDXUB23XDNSINFREIMICE9RQFIXMBRIUSPINXGITPSSBEGPHAU
iShares Dow Jones Industrial AverageSM UCITS ETFCIND10.90.890.830.790.670.70.760.680.660.710.670.530.210.550.750.070.190.39-0.02
SPDR® S&P US Dividend Aristocrats ETFSPYD0.910.840.70.710.580.610.650.590.590.690.570.480.130.440.790.150.230.36-0.02
SPDR® S&P 400 US MID CAP ETFSPY40.890.8410.860.810.730.770.790.80.660.710.750.590.20.640.810.140.130.450.01
Powershares EQQQ FundEQQQ0.830.70.8610.750.680.710.750.70.620.640.690.530.20.570.670.090.140.41-0.05
Vanguard FTSE Developed Europe Ucits ETFVEUR0.790.710.810.7510.910.960.950.780.660.740.820.790.210.680.690.16-0.080.58-0.02
UBS ETF - MSCI EMU 100% hedged to GBP UCITS ETF (GBP) A-disUC590.670.580.730.680.9110.880.880.690.540.570.720.710.20.570.610.01-0.30.46-0.21
iShares EURO STOXX Mid UCITS ETFDJMC0.70.610.770.710.960.8810.920.740.60.70.790.780.20.660.640.14-0.10.55-0.03
DBX DAX UCITS ETFXDDX0.760.650.790.750.950.880.9210.750.640.690.80.770.220.640.650.11-0.090.51-0.01
UBS ETF - MSCI Canada UCITS ETFUB230.680.590.80.70.780.690.740.7510.520.640.840.680.260.80.640.11-0.020.520.21
db x-trackers JPX-Nikkei 400 UCITS ETFXDNS0.660.590.660.620.660.540.60.640.5210.60.630.450.110.450.520.210.150.430.04
iShares Global Infrastructure UCITS ETFINFR0.710.690.710.640.740.570.70.690.640.610.650.540.140.60.690.350.330.560.16
iShares Core MSCI Emerging Markets IMI UCITS ETFEIMI0.670.570.750.690.820.720.790.80.840.630.6510.80.330.880.630.180.020.670.19
Amundi ETF MSCI Eastern Europe ex RussiaCE90.530.480.590.530.790.710.780.770.680.450.540.810.20.660.530.09-0.170.580.05
db x-trackers Harvest CSI300 INDEX UCITS ETF (DR)RQFI0.210.130.20.20.210.20.20.220.260.110.140.330.210.250.080.030.030.190.07
db x-trackers MSCI Brazil Index UCITS ETFXMBR0.550.440.640.570.680.570.660.640.80.450.60.880.660.2510.510.170.060.60.26
iShares US Property Yield UCITS ETFIUSP0.750.790.810.670.690.610.640.650.640.520.690.630.530.080.5110.290.130.580.04
iShares £ Index-Linked Gilts UCITS ETFINXG0.070.150.140.090.160.010.140.110.110.210.350.180.090.030.170.2910.490.470.25
iShares $ TIPS UCITS ETFITPS0.190.230.130.14-0.08-0.3-0.1-0.09-0.020.150.330.02-0.170.030.060.130.4910.220.45
UBS ETF - Barclays USD Emerging Markets Sovereign UCITS ETF hedged to GBP A-disSBEG0.390.360.450.410.580.460.550.510.520.430.560.670.580.190.60.580.470.2210.26
ETFS Physical GoldPHAU-0.02-0.020.01-0.05-0.02-0.21-0.03-0.010.210.040.160.190.050.070.260.040.250.450.261