Amundi cross-lists European multi-factor market neutral ETF

Jan 17th, 2018 | By | Category: Alternatives / Multi-Asset

Amundi has cross-listed the Amundi European Equity Multi Factor Market Neutral ETF (MKTN FP) onto Deutsche Börse and Borsa Italiana.

Amundi cross-lists European multi-factor market neutral ETF

The Amundi ETF provides market-neutral, multi-factor exposure to European equities.

The fund offers hedge-fund-like returns by providing a means for investors to gain access to the long-term potential of factor risk premia without being exposed to the direction of European equity markets.

The underlying index is the iStoxx Europe Multi-Factor Market Neutral Strategy Index, which replicates a long position in the iStoxx Europe Multi Factor Strategy Index (to gain factor-based equity exposure) combined with a short position in the Stoxx Europe 600 Futures Roll EUR Excess Return Index (to achieve a market neutral stance).

The strategy seeks to achieve exposure to beta risk of close to zero, thereby purely capturing the relative performance of a multi-factor equity approach – consisting of six factors (carry, low risk, momentum, size, value and quality) – compared to the broad market. Such an approach may still generate positive returns in falling equity markets as long as the multi-factor index experiences a more moderate decline compared to the broad market. Similarly, the strategy may produce a loss in upwards-trending markets if the multi-factor index underperforms the broad market index.

While the implementation of the index’s strategy is reviewed weekly to ensure it is meeting its required objective, some strategists may question the efficiency of the process. Given that the short position includes the entire market, this will undoubtedly result in both long and short exposure to certain stocks in the portfolio, leading to a potentially sub-optimal use of capital.

Commenting at the time of the fund’s original launch in November 2017, Nicolas Rabener, founder and managing director at independent research house FactorResearch, said: “investors may be cautious given that the short portfolio is replicated with an index, which is a significant difference to empirical research where stocks are used in the short portfolio construction and is what investors utilise for asset allocation decisions.”

The fund has a total expense ratio (TER) of 0.55%. It trades in euros on all exchanges and has the ticker code SMRN GR for the Deutsche Börse listing and MKTN IM for Borsa Italiana.

The packaging of such a market-neutral strategy – once available only to wealthy hedge fund investors – within an ETF structure, is reflective of the growing sophistication of the ETF industry and the growth in the number of strategies available to investors.

Amundi, however, is not the first to offer a hedge fund strategy in an accessible ETF format. UBS offers a range of hedge fund ETFs including the UBS HFRX Global Hedge Fund Index UCITS ETF (HFUSAS SW), which provides exposure to a broad range of hedge fund strategies through a single ETF ticker.

The UBS ETF tracks the HFRX Global Hedge Fund Index, which is designed to be representative of the overall composition of the hedge fund universe. Harnessing the Hedge Fund Research (HFR) database, the index is composed of all eligible hedge fund strategies, including, but not limited to: convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. The fund’s TER is 0.34%.

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