ETF of the Month
Issue April – May 2012
Ossiam ETF iSTOXX Europe Minimum Variance NR
AuM: EUR 61 mn
52-Week Range: 85.70 – 100.50
The investment objective of the Fund is to replicate, before the Fund’s fees and expenses, the performance of the iSTOXX Europe Minimum Variance Index Net Return.
The aim of the index is to deliver the net total return performance of a selection of stocks, from the STOXX Europe 600 Index that are the most liquid and weighted to minimize the volatility of the total portfolio (optimal weights). As a result, the index reflects the performance of a dynamic selection of the 300 most liquid stocks from the STOXX Europe 600 Index. Portfolio constituents are selected and weighted by a two-stage procedure that includes a liquidity filter and an optimization process. The portfolio is adjusted on a monthly base.
In the last couple of weeks we have seen a very positive trend for stocks worldwide. The rally was mainly led by cyclical sectors. Such an environment isn´t the best for minimum variance strategies, because they tend to favor defensive industries like consumer staples. So the Ossiam ETF underperformed the STOXX 600 year to date. But with round about 7.5% in three month in the STOXX 600 the rally could have been too strong. With a decreasing momentum time could be right for minimum variance strategies. Since its inception in June 2011 the Ossiam iSTOXX Europe Minimum Variance ETF outperformed the Stoxx 600 by round about 3.5%. This outperformance was primarily generated in the volatile markets in the second half of 2011. All in all minimum variance strategies are a good investment in volatile markets but should underperform in strong equity market rallies. But the true test will be how they perform over more than a full market cycle.
Copyright © 2012 Chart and Market data: Yahoo! Inc. and data vendors. Analysis: ETF Radar Global Research. All rights reserved. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue.