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Update: Ossiam US Minimum Variance NR UCITS ETF

Durch ein statistisches Verfahren soll die Volatilität eines S&P500-Portfolios reduziert werden. In diesem ETF befinden sich die 250 am meisten gehandelten Aktien des S&P500. Konsequenz ist eine derzeitige Übergewichtung defensiver Titel wie Versorger.

Caroline Gutman 17.04.2015

Rolle im Portfolio

The Ossiam US Minimum Variance NR is best suited as a core building block for conservative investors seeking exposure to U.S. equities with some downside protection. The fund provides broad exposure to many of the largest companies in the world’s biggest economy but with less volatility by tracking an index--the Ossiam U.S. Minimum Variance--which includes 250 of the most liquid constituents of the S&P 500, weighted to minimise the volatility of the total portfolio.

The fund is also suitable for shorter-term investors looking to control risk during volatile markets.

While the benefits of over-weighting some of the least volatile stocks relative to the S&P 500 are clear for investors, the risks are sometimes not as well understood. Perhaps the biggest risk worth highlighting is sector concentration. The Ossiam U.S. Minimum Variance Index is overweight in defensive stocks such as utilities and consumer staples. This means that, in rallying markets, the index may underperform the market-cap weighted S&P 500 index. On the flip side, however, in down markets andduring periods of high market uncertainties, the index should be expected to outperform.

U.S. equities comprise a large portion of many global equity indices, making up over half of the MSCI World Index. So combining this fund with a global product might result in an overweighting to U.S. equities.

The fund does not distribute dividends, so it may not suit investors seeking income.

Fundamentale Analyse

In the wake of the financial crisis, risk-controlled strategies like minimum variance have grown in popularity, with a surge of ETFs that attempt to capitalise on investor demand.

Strategies based on minimum variance (or minimum volatility) differ slightly from those based on low volatility. While the latter weight their constituents on historical volatility (1/volatility), the former weight their constituents on not only historical volatility but also correlation, together with other factors to help prevent overconcentration.

Historically, stocks with low volatility have performed well, trading at a discount to stocks with high volatility-- higher-growth stocks such as technology or consumer discretionary stocks tend to be more volatile than slow-growth utilities or consumer staples. And several studies have shown in back testing that low volatility and minimum variance indices can reduce volatility by up to one-third  versus their plain vanilla counterpart indices.

Volatility-related funds, however, have a few drawbacks. While stocks with low volatility can offer better returns than the broader market in a bearish environment, their returns may become less attractive in a strong bull market. Stocks with low volatility tend to be less sensitive to the business cycle than average and experience slower cash flow and earnings growth as the economy expands.

Another limitation to all volatility-related strategies is their reliance on backward-looking risk measures. One can question the use of historic volatility as an indicator for expected risk in the future, even if the strategy incorporates other factors like correlation. There is no guarantee that the historically least volatile stocks will remain so going forward. In fact, these stocks may become more volatile as more money flows into them and their valuations increase.

Since its inception in October 2011through March 2015, the fund had an annualised return of 19.2%, compared with 23.1% for the S&P 500 TR Index. It had an annualised volatility of 9.4%, compared with 9.5% for the S&P 500.

Indexkonstruktion

The Ossiam Minimum Variance Index is a free float portfolio of 250 of the most liquid stocks from the S&P 500 Index, weighted to minimise the volatility of the total index. The index constituents are entirely large cap equities, with a minimum market capitalisation of $4 billion. To be included in the index, constituents must also meet minimum liquidity requirements, based on their recent average daily volumes on their respective primary exchanges. The index is rebalanced on a monthly basis, adjusting for changes in volatilities and correlations. Individual sectors and stocks cannot exceed 20% and 5% of the total index value, respectively. The most significant sector exposures are consumer discretionary (20-22%), consumer staples (20-22%), health care (14-16%) and financials (10-12%). Portfolio concentration is limited, with the top ten stocks in the index making up just 17-19% of its total. Top constituents are Apple, Microsoft, Facebook and United Continental, with weightings of 5-7% each.

Fondskonstruktion

The fund uses synthetic replication to try to capture the performance of the Ossiam US Minimum Variance Index Net Return Index, entering a swap transaction with counterparties Natixis and Morgan Stanley. The fund buys and holds a substitute basket of securities, the performance of which is exchanged for the performance of the index. Ossiam provides full transparency on the components of the substitute basket, at least 60% of which must be equities of companies registered in OECD countries and 75% of which must be European securities. Counterparty risk exposure must not exceed 7% of the fund’s NAV at the end of any given day. This means that the substitute basket, which is reviewed on a daily basis, must represent at least 93% of the fund’s net asset value (NAV).

Gebühren

The fund’s total expense ratio (TER) is 0.65%, which is high compared to other low-volatility funds with exposure to the US large-cap equity market. However, the tracking difference (fund return – index return) over the last 3 year suggests that the TER is partly offset by swap enhancements (e.g. dividend tax optimisation). Other costs typically borne by the unitholder include bid-offer spreads and brokerage fees when buy and sell orders are placed for ETF shares.

Alternativen

There are other low volatility-themed funds currently available that offer exposure to the S&P 500, specifically SPDR S&P 500 Low Volatility ETF and iShares S&P 500 Minimum Volatility. As their names suggest, they follow different methodologies resulting in significant differences in sector and stock allocations relative to the S&P 500. The iShares S&P 500 Low Volatility ETF has the lowest fees, with a TER of 0.20%.

Über den Autor

Caroline Gutman  ist Fondsanalystin bei Morningstar.