The STOXX Europe 600 Paris-Aligned Benchmark: A Better Path to Success?

The STOXX® Europe 600 Paris-Aligned Benchmark Index was launched in June 2020. In back-tested data since March 2018, we find that the strategy has offered a higher return and lower volatility versus its benchmark. This paper drills down into some of the factors driving those results.

First, a brief look at returns: The STOXX® Europe 600 PAB Index had outperformed its benchmark fairly steadily in the period between October 2018 and very recently, with a few bursts of more substantial relative gains (Figure 1). The outperformance also came with a lower level of expected risk (18.7% vs. 19.9% annualized volatility). With a relatively low 2.4% realized tracking error for the full period, the index has produced an information ratio of 1.2 over this period compared with its benchmark index. Even given the recent underperformance from mid-April through May, the STOXX® Europe 600 PAB Index has had a strong year so far in 2020 – something we will outline in more detail after we have discussed the index’s risk characteristics.

Read the full report here.