Credit Suisse Launches Risk Appetite Investable Indices

The allocation model of the RAII Indices combines contrarian risk appetite signals with trend following and valuation metrics, and is estimated using 25 years of historical data. The product is un-leveraged, long only and uses tracker portfolios to gain exposure to the equity and bond markets.

The core concept of the RAII Index is to replace emotion with disciplined rules that add risk precisely when investors are most fearful and reduce risk when investors are feeling unusually optimistic. The investment objective of the European RAII is to significantly outperform a classic 50:50 balanced portfolio of equities and bonds, both in absolute and risk adjusted terms.

Jonathan Wilmot, Managing Director and Chief Global Strategist at Credit Suisse, said: "Experience confirms the basic intuition that extremes in investor confidence and risk appetite are strongly correlated across asset classes and fluctuations in sentiment can be captured by changes in the relative performance of safe assets like government bonds versus volatile assets like equities. Moreover, we have found that our index is closely related to cycles in global growth and liquidity as well as major shocks. As such, risk appetite is a decisive factor for market behaviour and our Index has helped us identify major opportunities for switching between safe and risky assets."

Walter Rotondo, Managing Director and Head of the Fund-Linked Products group, said: "By combining the expertise of our strategy and fund-linked products teams, Credit Suisse has created an index with strong historical performance, which provides a solid base for a range of structured products."

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