Ossiam's philosophy is to offer systematic investment strategies that will be implemented via transparent rule-based indexes (calculated by independent index providers) and an easy to trade investment vehicle such as ETFs, or any other type of Collective Investment Schemes.
- Minimum Variance
- Equal Weight
- Risk Weighted Enhanced Commodity
- Passive Strategies
- Shiller Barclays CAPE® Sector Value
- Global Multi-Asset Risk-Control
- Solactive Moody's Analytics IG EUR Select Credit
- US Steepener
- Euro Government Bonds 3-5Y Carbon Reduction
- How to trade an ETF
The minimum Variance strategy is an investment approach that explicitly addresses the objective of enhancing equity portfolio efficiency and diversification while reducing volatility. The approach uses the principle of portfolio optimization introduced by Harry Markowitz.The strategy forecasts future level of risk associated with different stock combinations and integrates this information to construct a lower-risk fully invested portfolio. Therefore, this approach is suitable for an investor that seeks for an equity exposure with significantly lower volatility .
Portfolio constituents are selected and weighted by a multi-stage procedure that includes filters (size, liquidity) and an optimization process. The portfolio is adjusted at fixed dates (as described in the graph below) following the evolution of volatilities and correlations among the most liquid stocks of a determined investment universe, and the application of a set of risk management constraints. Those constraints include maximum exposures to a single stock and industrial sectors. Other constraints include: keeping the portfolio 100% invested in stocks (with no short positions) and a diversification target with a minimum number of constituents in the portfolio at all times.
- A systematic, non discretionary approach, that concentrates on the risk profile.
- A strategy which captures the performance of the equity market with lower risk.
- OSSIAM iSTOXX® EUROPE MINIMUM VARIANCE NR UCITS ETF 1C (EUR): dynamic selection of the 300 most liquid stocks of the STOXX® Europe 600 index, weighted to minimize the volatility of the total portfolio.
- OSSIAM iSTOXX® EUROPE MINIMUM VARIANCE NR UCITS ETF 2C (EUR): dynamic selection of the 300 most liquid stocks of the STOXX® Europe 600 index, weighted to minimize the volatility of the total portfolio.
- OSSIAM US ESG MINIMUM VARIANCE NR UCITS ETF 1A (USD): dynamic selection of stocks which satisfy ESG criteria among the most liquid stocks from the Solactive US Large Cap Index, weighted to minimize the volatility of the total portfolio.
- OSSIAM US ESG MINIMUM VARIANCE NR UCITS ETF 1A (EUR)*: dynamic selection of stocks which satisfy ESG criteria among the most liquid stocks from the Solactive US Large Cap Index, weighted to minimize the volatility of the total portfolio.
- OSSIAM EMERGING MARKETS MINIMUM VARIANCE NR UCITS ETF 1C (USD): dynamic selection of the 400 most liquid among the largest stocks of the S&P/IFCI®, weighted to minimize the volatility of the total portfolio.
- OSSIAM EMERGING MARKETS MINIMUM VARIANCE NR UCITS ETF 1C (EUR)*: dynamic selection of the 400 most liquid stocks of S&P emerging markets index, namely the S&P/IFCI®, weighted to minimize the volatility of the total portfolio.
- OSSIAM WORLD MINIMUM VARIANCE NR UCITS ETF 1C (USD): dynamic selection of the 400 most liquid stocks of the S&P Global 1200®, weighted to minimize the volatility of the total portfolio.
- OSSIAM WORLD MINIMUM VARIANCE NR UCITS ETF 1C (EUR)*: dynamic selection of the 400 most liquid stocks of S&P Global 1200® index, weighted to minimize the volatility of the total portfolio.
- OSSIAM FTSE 100 MINIMUM VARIANCE UCITS ETF 1C (GBP): dynamic selection of the 95 most liquid stocks of the FTSE 100, weighted to minimize the volatility of the total portfolio.
* EUR share classes for the above mentionned ETF are not hedged against EUR/USD FX rate fluctuations.
- iSTOXX® Europe Minimum Variance Index: index calculated and published by STOXX Ltd
- US ESG Minimum Variance Index: index calculated and published by Solactive
- Ossiam Emerging Markets Minimum Variance Index: index calculated and published by Standard & Poor's
- Ossiam World Minimum Variance Index: index calculated and published by Standard & Poor's
- FTSE 100 Minimum Variance Index: calculated and published by FTSE
- Fundamental profile of the Ossiam Minimum Variance Indices - Tristan Perret, CFA
- Minimum variance portfolio : the art of constraints - Ksenya Rulik, PhD, CFA
- Impact of covariance cleaning techniques on minimum variance portfolios - Ksenya Rulik, PhD, CFA et Pedro Jandrey-Natal
- Mechanics of minimum variance investment approach - Ksenya Rulik, PhD, CFA et Bruno Monnier, CFA
Equity Equal Weight indices aim to provide investors with a more diversified exposure to a given stock market, avoiding dominance of a small group of stocks in the index (concentration effect). The indices attribute the same weight to each of their constituents. By doing so, the strategy seeks to avoid concentration and trend following bias of market-cap indices and bias towards large companies.
All constituents of an equal weight (or 1/N) index have the same weight at the review dates. As a consequence, an Equal Weight approach offers a size-neutral version of the corresponding market-cap weighted index. It tends to give more weight to the sectors that have a greater number of stocks, regardless of the sectors’ market capitalization.
- OSSIAM STOXX EUROPE 600 EQUAL WEIGHT NR UCITS ETF 1C (EUR): equally weighted version of the widely followed STOXX Europe 600 index which tracks the performance of 600 leading companies in major industries of across 18 European countries.
- Behind the performance of Equally Weighted Indices - Ksenya Rulik, PhD, CFA et Bruno Monnier, CFA
Commodity investments offer a way to potentially gain enhanced portfolio diversification, a protection against inflation, and equity-like returns. Commodities remain an important asset class in its own right. A risk weighted enhanced commodity strategy offers exposure to the asset class with better participation from all commodity sectors (avoiding concentration in oil) and a more efficient risk allocation in a global portfolio.
The strategy is embedded in the Risk Weighted Enhanced Commodity Ex Grains Index TR which provides investors with a systematic long-only exposure to a diversified basket of futures commodities contracts (excluding Grains) aiming at reducing volatility.
The index intends to obtain a portfolio that includes a selection of 20 commodities** weighted inversely proportionally to their risk level. The allocation gives more weights to the least volatile commodity, allowing for significant risk reduction and better diversification. The strategy provides additional benefits thanks to an enhanced roll mechanism which aims at reducing costs of rolling positions on the individual commodity futures contracts when in contango or benefiting from backwardation.
The constituents are rebalanced on a monthly basis by S&P (the Index Provider) , which calculates and publishes on a real time and end of day basis the Risk Weighted Enhanced Commodity Ex Grains Index TR*.
*TR, means Total Return, the index methodology includes interests generated by a fully collateralized investment in 3 months US T-Bill.
**Portfolio constituents are sub-indices of the S&P GSCI Enhanced and Dynamic indices on individual commodities.
- Captures commodities market performance (excluding Grains) while aiming at reducing volatility – the weighting process aims to attribute more weights to the least volatile commodities within a diversified basket of 20 commodity futures contracts in order to minimize volatility and reduce drawdown in comparison to the S&P GSCI Enhanced Index TR.
- Systematic long only exposure to global commodity markets (no discretionary decisions/no short positions) – the approach concentrates on risk profile – within a global commodity framework (excluding grains) without any explicit view on a given commodity or commodity group.
- Benefits from a dual-focus combined into one strategy - allocation and risk control that insures sound risk budgeting and better diversification, yield enhancing mechanism to mitigate the negative effect of the roll yield in contango or take full benefit of positive roll yield in backwardation when rolling futures contracts positions.
- OSSIAM RISK WEIGHTED ENHANCED COMMODITY EX. GRAINS TR UCITS ETF 1C (EUR)**: exposure to a diversified basket of 20 commodities* weighted inversely proportionally to their volatility level.
- OSSIAM RISK WEIGHTED ENHANCED COMMODITY EX. GRAINS TR UCITS ETF 1C (USD): exposure to a diversified basket of 20 commodities* weighted inversely proportionally to their volatility level.
* Portfolio constituents are sub-indices of S&P GSCI Enhanced and Dynamic indices on individual commodities. Each commodity sub-index reflects the performance of holding a long position in commodity futures contract.
** EUR share classes for the above mentionned ETF are not hedged against EUR/USD FX rate fluctuations.
- Risk Weighted Enhanced Commodity (Ex. Grains) Index : index created by Société Générale (the "Index Sponsor"), calculated and published by Standard & Poor's (the "Index Provider").
- Controlling investment risk in the commodity space - Bruno Monnier, CFA
The investment objective of OSSIAM MSCI CANADA NR fund is to replicate, before the Fund’s fees and expenses, the performance of the MSCI Canada Index Net CAD closing level. The Index – expressed in Canadian dollar ‐ is calculated and published by MSCI. The MSCI Canada Index is designed to measure the performance of the large and mid cap segments of the Canada market. With 100 constituents, the index reflects the performance of approximately 85% of the free float‐adjusted market capitalization in Canada.
The investment objective of the OSSIAM MSCI EMU NR (the “Fund”) is to reflect, before the Fund’s fees and expenses, the performance of the MSCI EMU Index (Ticker: MSDEEMUN index) (the “Index”) calculated and published by MSCI (the “Index Provider”). The Index is a net total return index (net dividends reinvested) expressed in EUR. The MSCI EMU Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity performance of 10 developed markets in countries in the EMU (European Economic and Monetary Union).
The investment objective of the OSSIAM MSCI Europe ex EMU NR (the “Fund”) is to reflect, before the Fund’s fees and expenses, the performance of the MSCI EUROPE ex EMU Index (Ticker: MSDEEXUN INDEX) (the “Index”) calculated and published by MSCI (the “Index Provider”). The Index is a net total return index (net dividends reinvested) expressed in EUR. The MSCI Europe ex EMU Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity performance of developed market in Europe excluding those in the EMU (European Economic and Monetary Union).
The investment objective of the OSSIAM MSCI JAPAN NR (the “Fund”) is to reflect, before the Fund’s fees and expenses, the performance of the MSCI JAPAN Index (Ticker: M7JP INDEX) (the “Index”) calculated and published by MSCI (the “Index Provider”). The Index is a net total return index (net dividends reinvested) expressed in JPY. The MSCI Japan Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity performance of the large and mid cap segments of the Japan market.
The investment objective of the OSSIAM MSCI USA NR (the “Fund”) is to reflect, before the Fund’s fees and expenses, the performance of the MSCI USA Index (Ticker: NDDUUS INDEX) (the “Index”) calculated and published by MSCI (the “Index Provider”). The Index is a net total return index (net dividends reinvested) expressed in USD. The MSCI USA Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity performance of the large and mid cap segments of the US market.
Shiller Barclays CAPE® Sector Value strategy offers equity exposure through a sector selection approach. The strategy is designed to offer large cap equity market exposure with a value bias.
Value investing has a long tradition in the investment management community and plays a prominent role in the academic finance literature as an outgrowth of the analysis of market (in)efficiency. Within the realm of academic finance, its origins can be traced back to the work of Basu (1977), Fama and French (1992), and Lakonishok, Shleifer, and Vishny (1994).
US economist professor Robert Shiller, who joined forces with Barclays to develop the Shiller Barclays CAPE® Sector index family, laid the foundations for identifying attractive sectors as long ago as 1988. He argued that valuation metrics with long-term focus are helpful in detecting in advance the future poor performers. The idea behind it is simple: equity sectors performance can be volatile. If the best sectors can be identified in advance then you can consistently invest in them and ignore the weak sectors.
Robert Shiller is a Yale professor, author of numerous books including the New York Times best seller “Irrational Exuberance”, and was jointly responsible for developing the Standard&Poor’s/Case-Shiller Home Price Indices.
The CAPE® ratio was formerly devised by Campbell and Shiller (1988) and has been widely used as a valuation tool for the overall stock market. Analogous to the much referenced P/E ratio, the intuition behind the CAPE ratio is that low ratios generally indicate high future returns and high ratios provide an overall contraction signal. A problematic aspect of the P/E ratio for investors with a medium/long term focus is its reliance on earnings information from only the past year. One year earnings tend to provide noisy signals, which are influenced by the business cycle. The cyclically adjusted price earnings (CAPE) ratio addresses this concern by using an average of longer term earnings. It is a ratio of current price to an average of inflation adjusted earnings over the past 1O years. It makes the ratio suited for detecting long term over and under-valuations in the stock market, making it more informative for investors with a long term focus.
The Shiller Barclays CAPE® sector value indices, developed jointly by Barclays and Professor Robert Shiller, use the cyclically adjusted price earnings (CAPE®) ratio as a key valuation driver in a sector rotational strategy which process is decribed hereafter for Europe (the same process is applied based on S&P sectors for the US index):
The strategy offers equity exposure (Europe or US) with a value bias and is intended for buy and hold investors with a multi-year time horizon. It aims to achieve overall outperformance in the long term, allowing for short term instances of underperformance against the relevant benchmark (MSCI Europe for Europe, S&P 500 for US). The strategy uses the CAPE® ratio as a key driver to identify undervalued equity sectors.
OSSIAM SHILLER BARCLAYS CAPE® EUROPE SECTOR VALUE TR UCITS ETF 1C (EUR): a fundamental smart beta approach tilted toward Value tracking an index developed jointly by Barclays and Professor Robert Shiller
OSSIAM SHILLER BARCLAYS CAPE® US SECTOR VALUE TR UCITS ETF 1C (EUR) and OSSIAM SHILLER BARCLAYS CAPE® US SECTOR VALUE TR UCITS ETF 1C (USD) : a fundamental smart beta approach tilted toward Value tracking an index developed jointly by Barclays and Professor Robert Shiller
European Sector Rotation Allocation Based on US Economist Robert Shiller CAPE® Ratio: Ksenya Rulik, PhD, CFA
The Global Multi-Asset Risk-Control strategy aims to provide a long exposure on a combination of a “Risky Assets Portfolio” and a “Cash Portfolio”.
The Risky Assets Portfolio comprises ETFs providing exposure to Western equities, Western treasury bonds, emerging markets (equities and bonds), corporate bonds, commodities, and real estate.
The underlying ETF constituents of the Risky Assets Portfolio are weighted in accordance with the principles of a mean-variance optimization so as to maximize the expected return while minimizing the expected volatility of the portfolio.
The Cash Portfolio comprises money market ETFs, which track the EONIA (Euro OverNight Index Average).
The Global Multi-Asset Risk-Control Index reflects a long exposure on a combination of a “Risky Assets Portfolio” and a “Cash Portfolio”. The Risky Assets Portfolio comprises ETFs providing exposure to Western equities, Western treasury bonds, emerging markets (equities and bonds), corporate bonds, commodities, and real estate. The underlying ETF constituents of the Risky Assets Portfolio are weighted in accordance with the principles of a mean-variance optimization so as to maximize the expected return while minimizing the expected volatility of the portfolio. The Cash Portfolio comprises money market ETFs, which track the EONIA (Euro OverNight Index Average).
The maximum drawdown control mechanism embedded in the Index methodology dynamically allocates between the Cash and the Risky Assets Portfolios, with the objective of keeping drawdowns of the Global Multi-Asset Risk-Control Index below 8%. The Index has a variable exposure of minimum 43% (maximum 100%) to “Risky Assets” ETFs and maximum 57% (minimum 0%) to ”Cash” ETFs.
The Index’s standard rebalancing is performed on a quarterly basis, on top of that optional rebalancings allow for dynamic review of the strategy’s exposures when market conditions worsen as volatility spikes.
- A quantitative, non-discretionary approach focused on risk management
- Exposure to a wide range of asset classes
- A dynamic allocation between asset classes according to the level of volatility
- OSSIAM GLOBAL MULTI-ASSET RISK-CONTROL UCITS ETF 1C (EUR) : Exposure to a broad range of asset classes, weighted to control the maximum drawdown of the portfolio.
- Global Multi-Asset Risk-Control Index: index calculated and published by Solactive AG
The strategy selects bonds by applying Moody’s Analytics’ public-firm EDF™ (Expected Default Frequency) credit measures, which are forward-looking, point-in-time default probabilities. These measures are based on information from equity markets and are combined with a detailed picture of a company's capital structure. Moody’s Analytics combines EDF metrics with other inputs to produce a credit spread valuation framework, known as FVS (Fair Value Spreads). EDF and FVS enable investors to gain exposure to the high quality corporate sector using a cost-efficient and liquid method.
The methodology selects a liquid and investable bond portfolio from the components of the Solactive Euro IG Corporate. The investment universe is first filtered to retain only the most liquid bonds. It is then further refined by a quality filter based on Moody’s Analytics’ EDF™ (Expected Default Frequency) to remove the bonds displaying the highest downside risk. The final stage of the process is to compare the remaining bonds Option Adjusted Spread to their Moody’s Analytics’ Fair Value Spread to select the 100 most-undervalued bonds The index, which remains exposure and duration neutral to the investment universe, is equally weighted, quarterly re-balanced , and attributes a maximum weight of 5% per issuer.
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A strategy which addresses the inefficiencies of traditional credit benchmarks
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Developed in partnership with Moody’s Analytics, a leading provider of credit analytics
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A systematic approach that seeks to maximize the return of a liquid and diversified selection of corporate bonds while maintaining a low credit risk profile
- OSSIAM SOLACTIVE MOODY'S ANALYTICS IG EUR SELECT CREDIT UCITS ETF 1C (EUR): selects investment opportunities among corporate bonds while targeting lower default risk
- SOLACTIVE MOODY'S ANALYTICS IG EUR Select Credit Index: index calculated and published by Solactive
The Ossiam US Steepener Strategy aims at replicating the performance of the Solactive US Treasury Yield Curve Steepener 2-5 vs 10-30 Index, a buyer/seller trading strategy on US Treasury futures, designed to benefit from a potential increase in the slope of the US interest rates, or yield curve, while limiting the portfolio sensitivity to a parallel shift of the yield curve.
The slope of the yield curve is measured as the difference between US long-term (10 and 30-Year) and short-term rates (2 and 5-Year). To benefit from an increase of the slope, the index is buying short-term US Treasury futures and selling long-term US Treasury futures at the same time.
To limit the portfolio sensitivity to a parallel shift of the yield curve, the “buyer” and the “seller” legs are adjusted during each rebalancing to reach a duration neutral exposure to USD interest rates.
- A strategy which provides a duration neutral exposure to the slope of the US Treasury yield curve
- A strategy which benefits from a potential increase in the slope of the US interest rates
The objective of the Ossiam Euro Government Bonds 3-5Y Carbon Reduction strategy is to replicate, before fees and expenses, the performance of the ICE 3-5 Year Euro Government Carbon Reduction Index. The index is composed of a selection of EUR denominated sovereign bonds with a remaining maturity greater than 3 years and less than 5 years, publicly issued by Eurozone country members.
The strategy targets a significant reduction of the average carbon metric of the ICE BofAML 3-5 Year Euro Government Index, the investment universe, through an optimization procedure that limits the deviation in country exposures with respect to the original bond weights in the investment universe. The carbon metric of the strategy is calculated using the carbon data of each country that constitutes the portfolio and their respective weights in the portfolio. The carbon metric is the average carbon emissions from consumptions per capita expressed in t/CO2/capita/year for each country.
The methodology of the index is available at indices.theice.com.
- Provides exposure to core eurozone bonds with a 3 to 5-year maturity
- Reduces the carbon footprint of the final portfolio over the long run
- Applies a country allocation that minimizes the exposure deviation from the investment universe