Amundi launches multi-strategy smart beta ETF

Jun 12th, 2014 | By | Category: Equities

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Amundi, Europe’s fifth largest provider of exchange-traded funds, has announced the launch of the Amundi ETF Global Equity Multi Smart Allocation Scientific Beta UCITS ETF.

Amundi launches multi-strategy smart beta ETF on NYSE Euronext Paris

Amundi has unveiled the Amundi ETF Global Equity Multi Smart Allocation Scientific Beta UCITS ETF on NYSE Euronext Paris.

Listed on Euronext Paris, the fund offers exposure to a sophisticated multi-factor smart beta strategy with the liquidity and simplicity of an ETF. It is aimed at long-term investors seeking a buy-and-hold global developed markets equities solution.

The fund is linked to the SciBeta Developed Multi-Beta Multi-Strategy ERC Index, a strategy index developed by Scientific Beta, the commercial indexing arm of EDHEC-Risk Institute.

The index, which is composed of four sub-indices, aims to outperform an equivalent market capitalisation-weighted strategy by intelligently allocating to a range of factors (represented by the sub-indices) that have historically been well-rewarded over the long term.

Each sub-index reflects one of the four following factors: (i) value, which invests in equities with high book to market value ratio; (ii) momentum, which invests in equities that have outperformed in the past; (iii) low volatility bias, which invests in equities with low volatility; and (iv) size, which invests in mid or small capitalisation equities.

In order to ensure that each of the sub-indices is diversified, an equally weighted combination of five diversification-based weighing schemes is applied to the respective portfolio of equities selected for that sub-index. These weighting schemes are: (i) max de-concentration, which aims to increase the diversification of securities in the portfolio; (ii) max de-correlation, which aims to reduce the correlation between the securities of the portfolio; (iii) min volatility, which aims to minimise the overall portfolio volatility; (iv) max Sharpe ratio, which aims to increase the risk-adjusted performance of the portfolio; and (v) diversified risk weighted, which aims to spread the risk equally across all of the securities contained in the portfolio.

The weights to each of the sub-indices are then allocated as such so that each factor makes an equal contribution to overall tracking error risk.

Long-term evaluation (40 years) of this combined approach shows that the excess annual return in relation to the cap-weighted equivalent is almost 4% and that the improvement in the Sharpe ratio is on average 113%.

The new ETF complements Amundi’s existing range of single smart beta strategies which can be used by investors as allocation bricks according to their market outlook. Smart beta ETFs already offered by the provider include minimum volatility, mid cap, small cap, growth, value and high dividend strategies.

Commenting on the launch, Valérie Baudson, Global Head of ETF and Indexing at Amundi, said: “This first Multi Smart Beta ETF launch on Euronext again demonstrates our commitment to innovation at the core of our product development strategy. This also marks a major step in our ‘Smart Beta’ ETF and indexing solutions offering”.

The ETF comes with a total expense ratio (TER) of 0.40% and is available in EUR, GBP and USD share classes.

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