Portfolio insurance concept

CPPI is a quantitative portfolio protection concept with a fixed term, which can be employed for both equities and fixed income. Portfolio protection concepts are designed to enable investors to participate in upward market movements, while limiting loss potential. This dynamic process automatically adjusts the portfolio allocation depending on the market situation, increasing the equity proportion in upward phases and the low-risk money market share when stock markets are falling. The investor pays for this security by forgoing some profits when equities are rising, because the ongoing insurance mechanism continuously skims off some of the earnings potential.

The TIPP concept is an extension of the CPPI concept. While CPPI defines a lower limit depending on the term of the CPPI concept, the floor with TIPP is independent of the term.
The TIPP investment concept is designed to minimise the effects that a lastingly negative development on EMU bond or share markets has on affected assets by controlling investment levels. Dynamic portfolio protection is pursued using a loss limit or floor, taking into account overnight risks for equities and fixed income. The floor rises when the value of the portfolio increases against the last peak and stays at this level when the equity value falls. There is no downward adjustment with TIPP.
The level of investment, with which the price risk is managed, is adjusted accordingly. If the equity value is falling as against the peak level, the level of investment is reduced successively. If the equity value rises against the last peak, the level of investment is increased.

Dynamic protection defines a balanced fund with portfolio insurance using diversification. Dynamic protection is a combination of a TIPP equity fund and a TIPP fixed income fund, with a 30/70 percent ratio of equities to bonds recommended on the basis of historical simulations and optimisations. Investment ratios subject to change without notice.