Less Can Be More!

We focus here on the specific management style of a French insurance company SMA BTP. The employed management style allows the management team to improve its diversified portfolio's return. Indeed, the stock sub-portfolio of this insurance company outperforms some known benchmarks such as Euro Stoxx index, CAC 40 French stock index or Euro Stoxx 50 index. Such a result comes from the targeted investment policy, which focuses only on one asset management level. Specifically, the management team applies only an asset selection policy.

Namely, SMA BTP management style is mainly founded on an internally developed scoring methodology that helps identifying market opportunities (e.g., fundamental asset values) whatever the considered asset class (e.g., money market, bonds, equity). As a result, SMA BTP management style allows for generating positive and non-negligible excess returns (for the stock component of its global portfolio) relative to the risk free rate as well as Euro Stoxx, CAC 40, and Euro Stoxx 50 stock index returns. We highlight this feature while realizing both a static and a dynamic performance analysis.

We then show that SMA BTP's specific management style is optimal in the lens of two basic important criteria, namely the portfolio's excess return and its performance persistence. On a static viewpoint, we employ known performance measures such as Sharpe and Treynor indices, and Jensen's alpha methodology. On a dynamic viewpoint, we apply the Flexible Least Squares (FLS) regression methodology to estimate time-varying alpha values. SMA BTP stock portfolio's performance persistence is underlined by the positive and stable behavior of the obtained FLS Jensen's alpha estimates.