Barclays has unveiled the Shiller Barclays CAPE Single Stock Indices, adding to the series of equity sector indices designed jointly by Nobel Prize-winning economist Professor Robert Shiller and Barclays.
Professor Robert Shiller. (file image)
Professor Shiller and Barclays began their collaboration in 2010, and in 2012 launched the Shiller Barclays CAPE Sector Index Family. These indices use the Cyclically Adjusted Price Earnings ratio (CAPE), developed by Professor Shiller and John Campbell in the 1980s, to identify long-term undervalued sectors in the US, Europe and Asia. The CAPE sector family has enjoyed significant popularity since launch and currently underlie a variety of investment products including several ETFs.
The latest additions to the index range also use the CAPE ratio to determine valuation but apply the methodology to single stocks of established companies across various regions rather than entire sectors.
Professor Robert Shiller commented: “This is a new and different approach to value investing that is designed to try to come closer to its original motivation: find stocks that are well established and relatively forgotten, with a long history of earnings but underpriced in the market.”
The new indices provide an alternative to market capitalization weighted indices by weighting constituents according to a value bias based on the CAPE ratio and momentum. The CAPE Single Stock indices will initially offer exposure to the US and eurozone regions with Japan and Asia ex-Japan to follow.
Ben Redmond, Director in EFS Solutions, Barclays, said: “Barclays is delighted to continue our long standing collaboration with renowned author and Yale economist Robert Shiller, producing indices which draw on some of his well-known investing concepts. This launch highlights Barclays’ commitment to bringing clients a full array of investable indices based on academic research.”
In addition to the long-only Single Stock indices, there will be market-hedged index versions, which hold a long position in the Shiller Barclays CAPE US Single Stock Index and a beta-adjusted short position in the relevant benchmark index, aiming to provide a ‘market neutral’ investment. This responds to investor interest in accessing the equity value risk premia.
In Europe, investors may access the original Shiller CAPE sector strategy through ETFs provided by Ossiam. The Ossiam Shiller Barclays CAPE Europe Sector Value UCITS ETF (LON: CAPE) trades in euros while the Ossiam Shiller Barclays CAPE US Sector Value UCITS ETF (LON: UCAP) trades in either US dollar or euro-denominated share classes. Each ETF is offered with a total expense ratio (TER) of 0.65%.