amLeague Managers Viewpoint

Ossiam was founded by Bruno Poulin, CEO, and Antoine Moreau, Deputy CEO, with a specific mission: to offer investors systematic passive investment strategies using alternatively-weighted indexes, also known as smart beta.

Ossiam was the first asset manager globally to launch a minimum variance ETF (2011) and the first asset manager to launch a smart beta risk-weighted commodity ETF (September 2013). Ossiam’s ETFs are listed on major stock exchanges across Europe.

Ossiam’s minimum variance strategy

Ossiam’s minimum variance strategy has a five-year track record with US and European equities. The strategy has subsequently been applied to FTSE 100, Global markets, Emerging markets and more recently, Japanese equities. The Ossiam FTSE 100 Minimum Variance UCITS ETF 1C (GBP) has returned 12.87% (annualised performance since inception - 16/12/2011 to 31/08/2016), a difference of +3.81% compared to the FTSE 100 Index TR (GBP). The Ossiam iSTOXX™ Europe Minimum Variance NR UCITS ETF 1C (EUR) has returned 9.89% (annualised performance since inception - 21/06/2011 to 31/08/2016) against 7.81% for the STOXX® Europe 600 Index NR (EUR).

In 2015, Ossiam launched the first ETFs, developed exclusively with Barclays Bank and in co-operation with Professor Robert Shiller, winner of the Nobel Prize for Economics, based on the Shiller Barclays CAPE® Sector indices. The Ossiam Shiller Barclays CAPE® US Sector Value TR UCITS ETF 1C (USD) has been particularly popular with investors, gathering USD 414 million by the end of August since launch in July 2015 and returning 11.89% (against 4.17% by the S&P500®) since inception.

This year Ossiam launched an ESG smart beta strategy and France-domiciled fund in response to investor demand. The fund is available to institutional investors in France.

Ossiam’s total assets under management were EUR 2.3 billion (GBP 1.94 billion) as of August 31st 2016, of which EUR 2.18 billion (GBP 1.86 billion) were in smart beta products and EUR 0.10 billion (GBP 0.09 billion) were in other passive investment funds. Our investors are primarily wholesale and institutional, including fund of fund managers, private banks, wealth managers and institutions.

Ossiam is an affiliate of Natixis Global Asset Management, the 16th largest global asset manager*, which owns 64% of Ossiam.

The Ossiam Europe Minimum Variance mandate on the amLeague platform: the CIO’s view

Fabien Dornier

CIO

Since its inception on the amLeague platform on March 30^th, 2012 and up until Aug 31^st, 2016, the Ossiam Europe Minimum Variance mandate returned 59.80%, to be compared with 48.98% for the STOXX® Europe 600. The outperformance might seem counterintuitive for a low volatility strategy in a bull market for the reference universe. The country and sector allocations have not contributed significantly to this outperformance. It is rather explained by the strong stock picking within those sectors and countries. The Materials sector is of peculiar interest and shows how the Minimum Variance process allocates between low volatility stocks and highly diversifying stocks:

• Givaudan, the Swiss fragrance and flavor manufacturer has been a core position of the portfolio since inception (around 2.5% weight, to be compared with 0.13% in the STOXX® Europe 600), thanks to its low volatility profile. It usually ranks among the ten least volatile stocks out of the whole European universe. The stock is up 189% in Euro terms since inception.
• UK gold miner Randgold Resources has been the top position of the portfolio for the last 12 months and over the same period, the stock outperformed the STOXX® Europe 600 by 57.71%. Randgold is selected by the investment process not because of its low volatility but due to its very low correlation to the rest of the Stoxx 600, and providing protection during the downturn of the market in early 2016 and post-Brexit vote.

Also to be noted, the mandate achieved its objective of volatility reduction, exhibiting a volatility of 12.25%, 4.41% lower than the STOXX® Europe 600 Index NR since inception.

* Cerulli Quantitative Update: Global Markets 2015 ranked Natixis Global Asset Management, S.A. as the 16th largest asset manager in the world based on assets under management ($890 billion) as of December 31, 2015.

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