Ossiam has reported that the Ossiam Shiller Barclays CAPE US Sector Value UCITS ETF (LON: UCAP) passed the $1 billion assets under management milestone in June.

Professor Robert Shiller. (file image)

Launched just two years ago, the ETF tracks the Shiller Barclays CAPE US Sector Value Net TR Index, developed jointly by Barclays and Nobel Prize-winning economist Professor Robert Shiller. The index uses the cyclically adjusted price-to-earnings (CAPE) ratio as a valuation driver in a sector rotational strategy.

The ratio is calculated by dividing the current market value of a group of companies’ shares by their average, inflation-adjusted earnings over ten years. By comparing this figure to historical averages of other groups, the ratio provides insight into how the companies are relatively valued.

In terms of the ETF’s methodology, the index has extended the CAPE metric to measure the relative value of equity sectors. The ratio compares the current value of a portfolio of companies in a sector to inflation-adjusted aggregated earnings of its constituents averaged over ten years to remove the effects of business cycles. Through this, the index attempts to identify and favour those sectors which are undervalued and avoid those sectors which are overvalued. There is a risk that some undervalued companies will not perform well over time, as some may be destined to stay undervalued or perhaps even fall in value if the underlying fundamentals of the business deteriorate. In order to avoid these companies the index applies a momentum filter to identify those which appear to be rising in value. The output of this methodology should be a portfolio with a value bias that aims to pick the right sectors at the right point in time.

Since launching in June 2015, the fund has returned 30.8%, comfortably outperforming the 17.7% delivered by the S&P 500 Index over the same period.

Bruno Poulin, CEO of Ossiam, commented: “This ETF is one of our most popular with investors, which we attribute to consistent positive returns through a range of market conditions since its launch using the highly-regarded CAPE ratio as the basis of valuation for the strategy. We are proud that our partnership with Professor Shiller and Barclays Bank has become a durable success.”

Shiller added: “The US stock market appears expensive by world standards right now, but not all sectors in it are. It makes sense to hold part of a diversified portfolio in the US with a focus on value, as provided by the Ossiam-Shiller-Barclays CAPE US products. I feel grateful to the people at Ossiam and at Barclays for the careful work they have done to make the CAPE products a reality for so many people.”

The ETF, available in three share classes (USD, EUR and EUR-hedged) is also listed on Deutsche Boerse, Euronext Paris, Borsa Italiana and SIX Swiss Exchange.

It has a total expense ratio (TER) of 0.65%.

Ossiam has stated the strategy has attracted allocations from a range of investors, including insurance companies, pension funds and discretionary wealth managers based in Europe and Latin America.

The strategy has also been applied to the European equity market through the Ossiam Shiller Barclays CAPE Europe Sector Value UCITS ETF (LON: CAPE). The fund has $130 million in AUM and a TER of 0.65%.