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iSTOXX™ Europe Minimum Variance

The approach initiated by Ossiam’s research and management team intends to obtain an optimized portfolio that includes a selection of stocks where volatility is among the lowest in the investment universe

Article also available in : English EN | français FR

Ossiam Minimum Variance strategy aims to provide investors exposure to a well-diversi?ed portfolio. The approach initiated by Ossiam’s research and management team intends to obtain an optimized portfolio that includes a selection of stocks where volatility is among the lowest in the investment universe, and historical correlations are moderate enough to allow for risk reduction.

The Fund tracks the performance of the Ossiam Minimum Variance strategy applied to a portfolio of European stocks. The investment process is embedded in the iSTOXX™ Europe Minimum Variance Index NR (“the Index” [1]). Due to its exposure to equity markets, the Fund may experience significant volatility

The approach is systematic (not discretionary) – It concentrates on the risk pro?le – shares are selected when the following risks have been measured: volatility, correlations, liquidity, portfolio concentration (individual stocks and sectors)

The strategy captures the equity market performance while mitigating risk – low volatility (at least 30% lower than the Base Index) [2] and drawdown signi?cantly reduced in comparison to the Base Index

Portfolio constituents are selected and weighted by a two-stage procedure that includes a liquidity ?lter and an optimization process.

On a monthly basis, the portfolio is adjusted (as described in the graph below) following the evolution of volatilities and correlations among the most liquid stocks of a determined investment universe, and the application of a set of risk management constraints. Those constraints include
- maximum exposures to a single stock (maximum weight per stock shall not exceed 4.5% of the value of the portfolio) and industrial sectors (maximum exposure to an industry sector shall not exceed 20% of the value of the portfolio).
- keeping the portfolio 100% invested in stocks (with no short positions)
- a diversi?cation target of no less than 50 constituents in the portfolio at all times

Fund characteristics

Inception date 21/06/2011
ETF ISIN LU0599612842
ETF ISIN Equity
Exposition Europe
TER [3] 0,65% per year
Investment policy – replication methodology Swap based with a minimum of 75% in equities securities or rights issued by companies having their registered office in the European Economic Area, excluding Liechtenstein.
Minimum Investment 1 unit
NAV (15/03/2013) 116,56 EUR
AUM (15/03/2013) 164,29M d’EUR
Dividend policy Accumulating
Eligible PEA et assurance vie
Management Company NGAM S.A.
Investment Manager Ossiam
Depositary and Administrative Agent State Street Bank Luxembourg S.A.
Custodian State Street Bank Luxembourg S.A.

RISK AND REWARD PROFILE OF OSSIAM ETF iSTOXX™ EUROPE MINIMUM VARIANCE NR

Based on the reconstituted history of the index, the Fund is ranked 6 on the synthetic risk and reward indicator scale. Due to its exposure to equity markets, the Fund may experience significant volatility, as expressed by its rank on the above scale.

Historical data may not be a reliable indication for the future. The risk category shown is not guaranteed and may shift over time. There is no capital guarantee or protection on the value of the Fund. The lowest category does not mean “risk free”.

Index Risk : The value of the Fund’s Shares is linked to the Index, the value of which may rise or fall. Hence, investors should note that the value of their investment could fall as well as rise and they should accept that there is no guarantee that the underlying methodology of the Index will indeed result in a return above any comparable investment strategy or that they will recover their initial investment.

Derivative and counterparty risk : As a result of entering into swap(s) transaction(s), the Fund is subject to potential counterparty and issuer risk. In the event of insolvency or default of the counterparty or issuer, the Fund could suffer a loss. The value of the swap(s) transaction(s) may vary according to several factors such as (but not limited to) the level of the Index, the level of interest rates and the liquidity of the equity market.

Further information regarding the products is available on the Ossiam website www.ossiam.com.

Next Finance , April 2013

Article also available in : English EN | français FR

Footnotes

[1] iSTOXX™ Europe Minimum Variance Index NR is calculated and published on a real time and end-of-day basis by STOXX

[2] For data before 14/06/2011 (launch date of the index), performance for the iSTOXX™ Europe Minimum Variance Index reflects calculations performed by Ossiam based on backtest data provided by STOXX Ltd. Backtested performance results do not represent the performance of actual trading using client assets, but are achieved by means of the retroactive application of a model. This model assumes reinvestment of net dividends. OSSIAM ETF iSTOXX® EUROPE MINIMUM VARIANCE NR is the investment vehicle that aims at replicating the iSTOXX™ Europe Minimum Variance Index NR. OSSIAM ETF iSTOXX™ EUROPE MINIMUM VARIANCE NR and vehicles replicating the STOXX® Europe 600 Index NR bear a total expense ratio (TER, composed for instance of management fees and other account expenses) and transaction costs that are not taken into account in the calculation of index performances. Due to differences of Total Expense Ratios, transaction costs and of tracking errors, actual performances of iSTOXX™ Europe Minimum Variance Index NR and vehicles replicating the STOXX® Europe 600 Index Net Return might differ from those of their respective underlying indexes. Past performance is no guarantee for future returns and does not take into consideration any commissions charged for purchase, redemption or conversion of shares.

[3] Total Expense Ratio

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Product iSTOXX™ Europe Minimum Variance

The approach initiated by Ossiam’s research and management team intends to obtain an optimized portfolio that includes a selection of stocks where volatility is among the lowest in the investment universe

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