We use two different methods to show the expected performance of our Model Portfolios, depending on the portfolio type:
Bond Portfolios (Conservative Bonds, Balanced Bonds, High Yield Bonds) display a Variable Rate based on Yield to Maturity (YTM)
The All Weather Portfolio and Permanent Portfolio display Portfolio performance based on Compound Annual Growth Rate (CAGR)
Below we explain both methods in detail.
Part 1: Variable Rate for Bond Portfolios
How is the Variable Rate calculated?
In every Bond Portfolio's description, the variable rate of return is displayed and is calculated as a weighted sum of the expected returns on the assets that make up the portfolio, minus all fees. The cash component earns the fixed interest rate from the Interest Account, according to your tariff plan. Click here for more details.
The formula is:
Where:
Y_{i} - Weighted Yield To Maturity — An estimate of the total rate of return for an investor who holds the asset to maturity and receives all interest and the capital redemption. The asset consists of bonds, each of which has a defined yield to maturity. With this yield to maturity for each bond, we calculate an indicator for the entire asset.
Weight_{i} - The weight of an instrument within a portfolio which corresponds to its allocation within the portfolio.
Fx_i - The exchange rate of the corresponding currency to EUR. Will always be equal to 1 for assets denominated in EUR.
Service Fee - An annual fee which depends on the currently chosen plan.
Here’s an example for a Basic plan (1% service fee applies) with a balanced portfolio with the following asset allocation:
Asset | Rate type | Rate | Allocation |
Cash (EUR) | Fixed | 2.83% | 40% |
iShares Core EUR Corp Bond UCITS ETF | Variable | 3% | 10% |
iShares Global High Yield Corp Bond UCITS ETF | Variable | 5.9% | 50% |
According to the formula, the target interest rate is calculated as follows:
The Variable Rate is a forward-looking estimate: it shows what you can expect to earn if market conditions remain stable and bonds are held to maturity.
Part 2: Portfolio Performance (CAGR) for All Weather and Permanent Portfolios
Why CAGR instead of a Variable Rate?
The All Weather and Permanent Portfolios include asset classes beyond bonds: equities, gold, and commodities. These assets do not have a yield to maturity, so we cannot calculate a meaningful variable rate.
Instead, we show Compound Annual Growth Rate (CAGR) based on a historical model backtest. While the variable rate is forward-looking, CAGR is backward-looking: it shows how the portfolio would have performed based on real historical market data.
Important: the CAGR figures shown are based entirely on a simulated historical model backtest. They do not represent the actual past performance of any fund or investment product. The backtest uses the current target asset allocation applied retrospectively to historical market prices. Actual results will differ due to market timing, fees, and rebalancing costs. Past performance is not a reliable indicator of future results.
What is CAGR?
CAGR is the average annual rate of return that an investment would have generated if it had grown at a steady rate over a given period. It smooths out year-to-year fluctuations and gives you a single number to compare different portfolios.
How do we calculate CAGR?
We run a historical model backtest using the target allocation of the portfolio and actual historical prices of the underlying instruments. Here is how it works:
Starting point: We take the target allocation of the portfolio (e.g. 30% Global Equities, 40% Long-term Bonds, etc.) and simulate investing a fixed amount at the start of the backtest period.
Daily tracking: Each day, we recalculate the portfolio value based on actual market prices of the underlying ETFs and ETCs. The cash component earns the fixed interest rate from the Interest Account, according to your tariff plan. Click here for more details.
Yearly rebalancing: At the end of each calendar year, the portfolio is rebalanced back to its target allocation, just as it would happen in practice.
CAGR calculation: After running the full simulation, we compute CAGR:
The default backtest period is up to 19 years.
What other metrics do we show?
In addition to CAGR, the portfolio detail page displays several other metrics to help you understand the risk and return profile:
Metric | What it means |
SRI (Summary Risk Indicator) | A risk score from 1 (lowest) to 7 (highest), calculated per EU PRIIP regulation based on historical volatility |
Annualized volatility | How much the portfolio value fluctuates on average per year. Higher volatility means more risk |
Sharpe ratio | Risk-adjusted return: how much excess return the portfolio earns per unit of risk. Calculated as (CAGR minus ECB deposit facility rate) divided by volatility |
Calendar-year returns | Return for each individual year in the backtest period, displayed as a color-coded bar chart |
Service fee | Annual fee percentage based on your plan. |
Evolution chart
The Evolution chart shows a bar for each calendar year in the backtest period:
Green bars indicate years with positive returns
Red bars indicate years with negative returns
Below the chart, you can see the percentage of positive years, the best year, and the worst year.
Possible growth paths
The Growth paths chart shows three scenarios for how your investment might perform over the next 3 years, based on actual historical data:
Scenario | Based on | Meaning |
Favorable | Best rolling 3-year return from the backtest | The best 3-year stretch the portfolio experienced historically |
Expected | CAGR over the full backtest period | The long-term average annual growth rate |
Unfavorable | Worst rolling 3-year return from the backtest | The worst 3-year stretch the portfolio experienced historically |
All three lines start from the same point and diverge over time, showing the range of possible outcomes.
Fees and costs
The performance figures shown on the portfolio page (both Variable Rate and CAGR) are calculated before the service fee. Your actual return will be reduced by the service fee applicable to your plan. You can always see the exact fee percentage on the portfolio detail page.
Instrument costs (TER, the Total Expense Ratio) are already reflected in ETF/ETC market prices, so they are implicitly included in both the Variable Rate and CAGR figures.
For details on fees, see What fees apply to Model Portfolios?
Quick comparison
| Bond Portfolios | All Weather / Permanent |
Performance metric | Variable rate | CAGR |
Calculation method | Yield to Maturity (YTM) | Historical model backtest |
Direction | Forward-looking estimate | Backward-looking (historical) |
Asset classes | Cash + Bond ETFs | Cash + Equity ETFs + Bond ETFs + Gold ETC + Commodity ETFs |
Risk level (SRI) | 2-3 | 3 |
Important: This is an investment product, and investing always bears risks. Past performance does not guarantee future results. The backtest is a model simulation based on historical data with yearly rebalancing. Actual returns may differ due to market conditions, timing of investments, and fees. To understand the risks, please refer to our Risk Disclosure Document.