Reconstructed Efficient Core ETFs

The Special section of the catalogue contains synthetic series approximating efficient core ETFs such as NTSX (US) and NTSI (ex-US). These are not the fund's official NAV, but a monthly reconstruction intended to enable longer backtests.

The idea behind the strategy

An efficient core aims to deliver the exposure of a balanced portfolio using less capital, through internal leverage. Instead of a classic 60/40, it holds for example ~90% equities and ~60% bonds: 150% gross exposure on 100% invested capital.

The point is to free up room in the portfolio. If a single instrument already gives you the equivalent of a slightly levered 60/40, the rest of your capital can go elsewhere: that's how these products are usually used.

The cost is that leverage amplifies the falls too, and that the financing carries a price which rises when rates rise.

How they are reconstructed

1. ETFs and reconstructed indices already on Backtes.to (equities and government bonds by region) are blended at the gross weights typical of the strategy (e.g. ~90% equity + ~60% bonds).
2. A Lombard loan leg with negative weight (e.g. −50%) is added to model the leverage financing: net weights still sum to 100%, while gross exposure exceeds it.
3. The resulting series is a monthly composite index (weighted blend plus the loan cost on the Lombard leg) published as simfactor:SY… in the catalogue.

Financing cost is therefore not a fixed assumption: it follows the model described in Lombard loan, and in high-rate periods it weighs heavily on the result.

Against other backtesters and the real fund

The composition used is inspired by these strategies' published allocations, but may differ from other backtesting tools or from the manager's actual implementation: index choice, bond duration, rebalancing frequency, costs.

Use the series for approximate historical comparisons, not as a certified replication of the listed product. If you're evaluating buying the real fund, its official figures remain the only reference.

What to look at in the backtest

The useful way to read an efficient core isn't comparing its return to pure equity, but checking two things:

• Is the drawdown what you expected? Leverage makes falls deeper than the intuition "it's a balanced fund" suggests.
• What happens when stocks and bonds fall together? 2022 is the test case: the diversification the strategy leans on failed exactly while financing costs were rising.