Ossiam has expanded its suite of smart beta exchange-traded funds with the launch of the Ossiam Global Multi-Asset Risk-Control ETF. The ETF is a fund-of-funds which invests in other ETFs to gain global exposure to a variety of asset classes with the intention of controlling the maximum drawdown of the total portfolio while simultaneously maximizing expected return. It has been listed in France and is due to be rolled out in Germany shortly.

Bruno Poulin, CEO of Ossiam.

The euro-denominated fund tracks the Global Multi-Asset Risk-Control Index, a systematic rules-based benchmark which reflects a long exposure to 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 Euro OverNight Index Average, a weighted average of all overnight unsecured lending transactions in the Euro interbank market.

The maximum drawdown control mechanism embedded in the index’s 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 with remaining exposure allocated to Cash ETFs.

The index’s standard rebalancing is performed on a quarterly basis, while optional rebalancing allows for a dynamic review of the strategy’s exposures under stressed market conditions.

Bruno Poulin, CEO of Ossiam, commented: “Our new ETF addresses growing investor interest in systematic rules-based and risk-controlled investment solutions, which invest cost-effectively and transparently in a broadly-diversified portfolio of different asset classes. Risk control, which is a particular focus of the ETF, serves to control losses in the event of major market corrections. The fund is aimed at investors who seek relatively low and clearly limited risk. Offering such a solution in an ETF format reinforces Ossiam’s positioning as a provider focused on innovative value-adding strategies.”

The ETF’s total expense ratio is 0.55% per year.