Our global equity portfolio process is designed according a « bottom up » philosophy underpinned by macro economic and strategic internal views. In this respect, it includes our geographic and sector views and our style anticipation.
Our equity management leads to conviction funds, which means relatively concentrated portfolios in terms of number of investments (40-60 lines). Stock selection depends on the company intrinsic quality and weighting in portfolio is not in relation to its benchmark weight. Thus, if we do not like a company that has a strong weighting in the benchmark, we will not invest. The weight of the stock within the portfolio is based on the fundamental characteristics of the value and the risk profile. The top ten holdings account for a third of the portfolio weighting.
Today, from a macroeconomic point of view, our base scenario includes continued global growth. The US economy is to expand at a 3% rate, the situation in the Euro Zone led by Germany is in for improvement and for China the economy is still growing at a strong pace.
These views are reflected in terms of a balanced geographical portfolio between North America and Europe, each area representing approximately 45 % of the total portfolio. This profile should be the means to benefit from a North American economy with strong fundamentals and self- sustaining growth and from Europe where the catch-up potential is linked to growth momentum prospects from a profits recovery. In addition, this region, in particular the Euro Zone should benefit from a risk reallocation from investors still notoriously exposed to equities. The balance is invested in the Asia- Pacific region. This area should indeed continue to benefit from the growth of Chinese economy which normalises with the emergence of a middle class but that nevertheless remains in the lead of global growth.
From a sectoral perspective, technology, healthcare and consumer discretionary are favoured , which represents a preference of growth and cyclical stocks.
Ossiam is a Smart Beta asset management company that develops and manages purely systematic investment funds. In May 2012 Ossiam joined the AM League Global Mandate. The investment process applied by Ossiam’s investment team reflects the investment process of Ossiam’s existing minimum variance strategy applied to international equities available in a Smart Beta ETF wrapper. It reflects the evolution (net dividends reinvested) of a selection of global stocks, with the intention to mitigate volatility.
Minimum Variance is an investment approach that explicitly addresses the objective of reducing volatility and offering better risk/adjusted returns in the long term.
On a year-to-date basis, the Ossiam AM League Global Mandate (+3.5%) has outperformed the Benchmark Stoxx Global 1800 (+1.6%) by approximately 1.9%. A detailed performance attribution shows that this outperformance is the result of two contradictory effects :
An excellent stock picking in the US (bringing +2.5% of excess return), Japan (+0.8%), UK (+0.2%) and Canada (+0.2%)
A negative country allocation (-1.8%), mainly due to underweighting of Europe (on average, 5% vs 30%) and the overweighting of Japan (on average, 19% vs 9.5% in the Benchmark), which is down 8.3% so far in 2014.
The portfolio was rebalanced in March. The most notable changes to the portfolio allocation were :
Sectors : increase in Financials (now at 9%) and a decrease of Consumer Discretionary (now at 10%) and Materials (now at 2.5%). The portfolio is still massively overweight in Staples (20% vs 9.7% in the Benchmark), Healthcare (20% vs 11.6%) and Utilities (17% vs 3.3%)
Countries : Japan was substantially reduced (by 8%), to the benefit of the US (+6%) and Australia (+3%). The portfolio is heavily biased towards the US (75% vs 52%) and Japan (14% vs 9.2%)
On a year to date basis, the volatility of the portfolio was 8.9% vs 10.7% for the benchmark Stoxx Global 1800.
We believe the portfolio is well positioned for the upcoming months and should fulfill its objective of providing an access to global equity returns with less volatility.
These results are consistent with those obtained in other investment universes by Ossiam. As an illustrative example, Ossiam leads the amLeague ranking in Europe Equities YTD.
Furthermore, Ossiam is widely recognized by its peers and its strategies have received awards for their excellence and their contribution to the development of the sector. As a result, in March 2014 Ossiam won the Best Emerging Markets Equity ETF Manager category of the fifth etfexpress award for excellence.
When we decided to join AM League’s Global Mandate in December 2011, our objective was to test our proprietary model M.U.S.T.® (Measurement Under Standardized Tools) in a global arena. Like modern gladiators, we prepared ourselves to expose our performances to everyone’s eyes in a non-stopping combat against the STOXX® 1800.
Armed with our sword and shield (Attractiveness and RMV* that compose the M.U.S.T® model) we went through American, European and Japanese arenas and the results were very satisfying.
Now, after two years and four months, we review the results of this international experience.
Not a single day lost at Roche-Brune AM! What happened during this first round?
Small advantage for the STOXX® 1800: Since inception, Roche-Brune AM Global mandate generated a 36.11% performance versus 40.85% for the Index with a volatility of 9.88% (close to the index’s volatility).
A defensive fund: Over the period, our fund had a 0.88 beta and a Max Drawdown of -9.14% versus -9.36% for the STOXX® 1800.
Implicit bets: Even if we have a “bottom up” approach, the final allocation of our portfolio makes us place bets in different sectors, countries and market capitalizations based on our convictions (stock-picking).
Geographic bets: We are underexposed to the US market and we are overexposed to Japanese and European markets
Sectorial bets: Our portfolio is more exposed to industrial goods and services and retail sectors and, on the opposite, less exposed to banks and chemicals.
Market Capitalization: We are overexposed to small caps (1 to 5 billion dollars) and underexposed to large caps (10 billion dollars and more)
Future perspectives:
M.U.S.T® model has already proved himself as an excellent challenger against European Indexes (STOXX® 600 and EUROSTOXX300®). The stocks we have chosen for our global mandate have an enormous upside potential because they are interesting both in a fundamental level and in market level (expected returns).
We are confident about our capacity to outperform, over the time, our reference index with a lower volatility in this global arena.
“Picking, allocation and dosing” is our precept.
At the beginning of every month, le Temps will publish the rankings on its website,
featuring an in-depth analysis written by bfinance, an independent financial services firm that provides advice to companies and institutional investors around the globe. [Please click here to read this commentary.]
Our global equity portfolio process is designed according a « bottom up » philosophy underpinned by macro economic and strategic internal views. In this respect, it includes our geographic and sector views and our style anticipation.
Our equity management leads to conviction funds, which means relatively concentrated portfolios in terms of number of investments (40-60 lines). Stock selection depends on the company intrinsic quality and weighting in portfolio is not in relation to its benchmark weight. Thus, if we do not like a company that has a strong weighting in the benchmark, we will not invest. The weight of the stock within the portfolio is based on the fundamental characteristics of the value and the risk profile. The top ten holdings account for a third of the portfolio weighting.
Today, from a macroeconomic point of view, our base scenario includes continued global growth. The US economy is to expand at a 3% rate, the situation in the Euro Zone led by Germany is in for improvement and for China the economy is still growing at a strong pace.
These views are reflected in terms of a balanced geographical portfolio between North America and Europe, each area representing approximately 45 % of the total portfolio. This profile should be the means to benefit from a North American economy with strong fundamentals and self- sustaining growth and from Europe where the catch-up potential is linked to growth momentum prospects from a profits recovery. In addition, this region, in particular the Euro Zone should benefit from a risk reallocation from investors still notoriously exposed to equities. The balance is invested in the Asia- Pacific region. This area should indeed continue to benefit from the growth of Chinese economy which normalises with the emergence of a middle class but that nevertheless remains in the lead of global growth.
From a sectoral perspective, technology, healthcare and consumer discretionary are favoured , which represents a preference of growth and cyclical stocks.