Barclays launches “Shiller CAPE” ETN

Oct 12th, 2012 | By | Category: Equities

Barclays Bank has announced the listing of the Barclays ETN+ Shiller CAPE ETN (CAPE), an exchange-traded note (ETN) that provides notional long exposure to four comparatively undervalued US equity sectors that also exhibit relatively strong price momentum.

Barclays launches "Shiller CAPE" ETN

The ETN is linked to the Shiller Barclays CAPE US Core Sector Index, part of the recently launched Shiller Barclays CAPE Index family developed by Yale professor Robert Shiller.

The new ETN is linked to the Shiller Barclays CAPE US Core Sector Index, which is part of the recently launched Shiller Barclays CAPE Index family.

The Shiller Barclays CAPE US Core Sector Index uses the cyclically-adjusted price-to-earnings (CAPE) ratio as a metric for the valuation of US equity sectors.

Developed by Yale professor Robert Shiller, the CAPE ratio avoids the problem of volatile earnings in the conventional price-to-earnings ratio by averaging the inflation-adjusted earnings of the previous 10 years.

The index incorporates a modified CAPE ratio to assess equity market valuations of nine sectors in the S&P 500. The index then selects the top four undervalued sectors that possess relatively stronger price momentum over the past twelve months and allocates an equally weighted notional long position in the total return version of the relevant S&P Select Sector Indices.

“I found the collaboration with Barclays most productive. We have learned that applying the CAPE ratio concept to sectors within the US stock market offers a new, and powerful, approach to value investing,” said Professor Shiller.

“The ETN utilises Professor Shiller’s frequently cited CAPE ratio applied for the first time to sectors to create a value-oriented sector strategy developed through research conducted by Barclays and Professor Shiller over the course of a year-long collaboration,” said Laurence Black, a Director in Equity and Funds Structured Markets at Barclays.

“We are pleased to expand our product offering in the ETN+ platform,” said Ian Merrill, Head of Investor Solutions Product Origination, Americas, at Barclays. “The Barclays ETN+ Shiller CAPE ETN offers investors access to a unique value-based strategy with potential for long-term equity investing.”

The ETN is listed on the NYSE Arca and comes with an annual fee of 0.45%.

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