Ossiam launches Shiller Barclays CAPE Sector Value Europe ETF

Feb 17th, 2015 | By | Category: Equities

Ossiam, a leading provider of smart beta investment solutions, has teamed up with Barclays to launch the Ossiam Shiller Barclays CAPE Europe Sector Value TR UCITS ETF 1C (EUR).

Ossiam launches Shiller Barclays CAPE Sector Value Europe ETF

Professor Robert Shiller.

The fund, which has been listed on the London Stock Exchange, is the first ETF globally to be based on the Shiller Barclays CAPE Sector Indices.

The Shiller Barclays CAPE Sector Indices, developed jointly by Barclays and Nobel Prize-winning economist Professor Robert Shiller, use the Cyclically Adjusted Price-to-Earnings (CAPE) ratio as a valuation driver in a sector rotational strategy.

Professor Shiller, with his graduate student John Campbell, devised the original CAPE ratio in 1981. The CAPE ratio is a widely used valuation metric providing a view on equities being over- or under-valued. The ratio compares the current value of a portfolio to inflation-adjusted aggregated earnings of its constituents averaged over ten years to remove the effects of business cycles. This makes the ratio suitable for investment decisions with a long-term focus.

Professor Shiller extended the CAPE measure to equity sectors and, in collaboration with Barclays, designed the Shiller Barclays CAPE Europe Sector Value Net TR Index, the basis of the new ETF. The strategy uses the Relative CAPE indicator, a normalised version of the CAPE ratio, supplemented with a momentum filter.

The strategy starts with a universe of ten sectors, components of the MSCI Europe Index, and systematically identifies and allocates to the four most undervalued sectors, according to the CAPE. It aims to avoid overvalued sectors as well as eliminating potential value traps, creating a sector portfolio with value bias that helps to pick the right industries at the right point in time.

The index went live in September 2013, and, as of 31 December 2014, has delivered an annualised return of 14.07%, compared to 13.01% for the MSCI Europe Index.

Ossiam plans to launch further ETFs based on the Shiller Barclays CAPE Sector indices later this year.

Bruno Poulin, CEO of Ossiam, said: “We are proud of our association with Barclays and Professor Robert Shiller which has enabled the development of the latest addition to our range of innovative funds. This is a long-term partnership we intend to continue for future projects. The Ossiam Shiller Barclays CAPE Europe Sector Value TR ETF gives investors with a long-term horizon the ability to invest systematically in European undervalued equity sectors using a highly reputable index in a way that has not been achieved with other fundamental alternatively-weighted index methodologies.“

The ETF, which is UCITS-compliant, has 28 million euros in assets under management and trades on the LSE in euros (ticker: CAPE) and in GBP (ticker: LCPE). It has a total expense ratio of 0.65% and is distributed and marketed in the United Kingdom through Natixis Global Asset Management (NGAM), of which Ossiam is an affiliate.

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