Ossiam’s smart beta CAPE US Sector Value ETF sees $400m flow in

Jul 26th, 2016 | By | Category: ETF and Index News

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Smart beta exchange-traded fund provider Ossiam has announced that its Ossiam Shiller Barclays CAPE US Sector Value TR UCITS ETF (LSE: UCAP) has attracted more than $400m since its launch in June last year.

Ossiam launches Shiller Barclays CAPE Sector Value Europe ETF

Professor Robert Shiller.

The ETF, which tracks the Ossiam Shiller Barclays CAPE US Sector Value TR Index, has returned 5.73% since it launched a year ago, which compares with the 0.44% delivered by the S&P 500 Net TR Index over the same period.

The ETF’s underlying index is part of the CAPE indices, which was developed between Barclays and Prof. Robert Shiller and uses the Cyclically Adjusted Price-to-Earnings (CAPE) ratio to time a sector-rotation strategy. The ratio is a widely used metric for determining if equities are over- or under-valued.

Professor Robert Shiller said: “I am pleased to mark the first anniversary of the Ossiam Shiller Barclays CAPE US fund. The ETFs offer access to a value strategy using the CAPE ratio that my colleague John Campbell and I first developed in the 1980s, but now adapted for use with sector allocations. This alternative value strategy aims to provide an independent contribution to improved portfolio performance. It is a smart-beta product in that it follows consistent investing rules rather than intuitive plays that may sometimes be swept up in market excesses.”

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

The index ultimately measures the relative value of equity sectors and 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 indices apply 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.

According to a note from Ossiam, “in a turbulent equity environment, the outperformance of both US and European underlying indices against their benchmarks was mainly driven by successful sector selection. Both indices managed to identify undervalued sectors while avoiding the worst-performing sector in each region. This was particularly evident in the aftermath of the UK’s EU referendum.”

Ossiam also offers the Ossiam Shiller Barclays CAPE Europe Sector Value TR ETF, which tracks another of the Shiller Barclays CAPE Europe Sector Value TR index, which is part of the CAPE indices. It has delivered -0.12% YTD in comparison to the -7.73% delivered by the MSCI Europe Net TR Index. However, despite a poor performance over the last year it has outperformed its benchmark by 3.69% (as of 30th June 2016) since its launch in December 2014.

Bruno Poulin, CEO of Ossiam, commented: “The Ossiam Shiller Barclays CAPE Sector Value ETFs offer investors both a sector rotation and a value investment strategy for US and European stock markets with transparency at low cost. Now we can confidently point to their ability to perform in line with their objectives through testing global market conditions. We are very pleased to continue our productive partnership with Barclays Bank and Professor Shiller.”

The Ossiam Shiller Barclays CAPE US Sector Value TR UCITS ETF is listed on the London Stock Exchange, Deutsche Bourse’s Xetra and the SIX Swiss Exchange. It has a total expense ratio of 0.65%.

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