We also adhere to the principle of the portfolio theory when investing on the stock market. Here too, the objective is to spread the risks and chances on a broad basis in order to achieve a steady increase in value.
At present, equities make up 43 % of the disposable Foundation's assets. A good two fifths of the assets held in the form of equities are from euro-zone countries. The other assets are distributed among shares from the USA, Canada, the countries of Europe outside of the eurozone and various countries in South-East Asia. In this case, external mandates for special funds have been given to various financial investment management companies.
In the interest of diversification, when investing in equities the Volkswagen Foundation attaches paramount importance to being present in markets of different geographical regions. The investments of the Foundation in equities are structured by separate portfolios for the individual market segments. Each portfolio is assigned a certain benchmark. These benchmarks contain typical indices for the corresponding investment sectors, which reflect their development and serve as measures of performance for individual markets.
A passive management approach was selected for most of the special funds, as also for the stock holdings managed by the Foundation itself. Here the fund management is set the task of achieving the corresponding benchmark. Possible negative market trends are taken into account, as these are generally compensated by positive trends elsewhere in the Foundation's portfolio. On aggregate this results in a smoothing of the fluctuations in value accompanied by reduced risks. An exception is a portfolio that contains European Small Caps and is managed actively.
When selecting its investments, the Volkswagen Foundation uses an index for its self-administered financial portfolio that pays particular attention to ecological and ethical criteria as well as good corporate governance. While this index focuses on companies in the euro zone, its international counterpart is represented in one of the special funds. Although conventional benchmarks are in most cases still used for the special funds, the Volkswagen Foundation takes care to refrain from making certain investments in individual cases. For example, cluster bomb manufacturers and the like are excluded from its portfolio.
Over and above this, all the Foundation’s financial assets – in the direct portfolio as well as in the special funds – are examined for comprehensive ESG criteria (ESG stands for Environmental, Social, Governance). In this respect, a key determinant provides information on the extent to which a portfolio meets the defined criteria.