Ossiam launches low-volatility global equity ETF

Oct 22nd, 2012 | By | Category: Equities

Ossiam, the smart beta specialist and affiliate of Natixis Global Asset Management (NGAM), has added to its suite of low-volatility exchange-traded funds (ETFs) with the launch of the Ossiam ETF World Minimum Variance NR (OSXA).

Ossiam launches low-volatility global equity ETF

The Ossiam ETF World Minimum Variance NR is designed to deliver exposure to global equities with reduced volatility.

The new fund applies the firm’s proprietary minimum variance strategy to a global developed equity universe, providing efficient exposure to the world economy with reduced volatility.

The fund, which will be listed on the NYSE Euronext Paris, Borsa Italiana and Deutsche Börse on October 22, 2012 and on the London Stock Exchange on October 29, 2012, replicates the performance of the Ossiam World Minimum Variance Index NR.

The aim of this index is to deliver the net total return performance of a selection of the most liquid stocks from the S&P Global 1200 Index, weighted to minimise the risk of the total portfolio. The S&P Global 1200 Index is a market capitalisation-weighted index covering 31 countries and approximately 70% of global stock market capitalisation.

On a sector basis, the top five weights within the Ossiam World Minimum Variance Index are currently consumer staples with 19.9%, consumer discretionary with 16.2%, utilities with 15.5.%, health care with 15.3% and telecommunication services with 14.4%. In terms of country weights, the US dominates with 63.5%, followed by Japan with 22.0%, Canada with 5.0%, the UK with 4.5% and Switzerland with 3.4%.

The top five companies are Nippon Telegraph & Telephone, Autozone, Duke Energy, Astellas Pharma and East Japan Railway Company.

Bruno Poulin, CEO of Ossiam, said: “Following the success of its minimum variance strategy in other products, Ossiam recognised the opportunity to make available to investors a means of investing in a global equities portfolio that aims to reduce volatility. Ossiam’s Minimum Variance ETFs offer access to diversified portfolios – exposed to equity markets with on average a 30% reduction in volatility and drawdowns in a systematic framework.”

This success has encouraged investors – institutional, wholesale and retail – to continue to steadily allocate to Ossiam’s strategies and ETFs since their launch in June 2011. As of September 30, 2012, the firm had assets under management of €525.5 million including $264.4 million in the Ossiam ETF US Minimum Variance NR (LUMV); €137.3 million in the Ossiam ETF iSTOXX Europe Minimum Variance NR (LEMV); £13 million in the Ossiam ETF FTSE 100 Minimum Variance (UKMV); and $64.1 million in the Ossiam ETF Emerging Markets Minimum Variance NR (DEMV).

Hervé Guinamant, President and Chief Executive Officer of NGAM International Distribution, said:  “Volatility is here to stay and so are strategies to address it. Our recent global survey demonstrated that the vast majority of institutional investors are finding it difficult to mitigate the impact of market volatility on portfolios. But an even greater proportion view market volatility as an investment opportunity. Ossiam’s strategies and funds are designed to both stand up to today’s volatile markets and help investors reach their return objectives, making them a key component in building more durable portfolios.”

In the UK, the new ETF will be listed in GBP and USD and have a total expense ratio of 0.65% per annum.

The fund will likely come up against the Lyxor ETF MSCI World Risk Weighted (WLDR), which launched in June and is based on the MSCI World Risk Weighted index. The MSCI World Risk Weighted index tracks the same universe of securities as the widely followed MSCI World index; however, it aims to reduce risk in the portfolio by weighting each constituent inversely to risk, as measured by its volatility: the higher the risk of a constituent, the lower its weight. The aim of this is to reduce the overall volatility of the portfolio by limiting exposure to highly volatile stocks. The Lyxor ETF is listed on the NYSE Euronext and comes with a TER of 0.45%.

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