Ossiam launches first smart beta risk-weighted commodity ETF
Ossiam has listed a UCITS exchange-traded fund on the London Stock Exchange that tracks the Risk-Weighted Enhanced Commodity Ex-Grains Index, calculated and published intraday by S&P.
It is the first risk-weighted smart beta commodity ETF launched globally.
The Ossiam Risk-Weighted Enhanced Commodity ex. Grains TR UCITS ETF provides investors with systematic long-only exposure to a diversified basket of 20 commodities futures contracts (excluding grains) with reduced volatility. When compared with standard ETFs tracking long-only broad commodity indices, the underlying index offers potentially better participation from all commodity sectors while avoiding concentration on oil. This enables more efficient risk allocation in a portfolio.
Bruno Poulin, chief executive of Ossiam, says: “The launch of this new ETF based on commodities marks an important stage in our development and is part of Ossiam’s long term aim to offer an innovative and comprehensive range of smart beta investment solutions to investors. We are showing our industry leadership position in developing and executing alternative-weighted investment strategies that meet the objectives of risk-focused investors.“
Terry Mellish, head of UK institutional business, Natixis Global Asset Management, says: “We believe that Ossiam’s new ETF on commodities will allow investors to potentially gain enhanced portfolio diversification while protecting against inflation. Commodities have historically had a low correlation to traditional asset classes and for this reason we see them as a positive tool for investors trying to broaden their asset exposure and build more durable portfolios.”
The index combines two particular features in one strategy. Firstly, the investment process enables allocation between 20 commodities futures contracts according to a risk weighted scheme. The index is rebalanced on a monthly basis, with each commodity future contract weighted in inverse proportion to its realised volatility. This ensures sound risk budgeting by allocating more weight to commodities futures contracts with the lowest volatility.
The strategy also features an enhanced roll yield mechanism by selecting and rolling futures contracts according to the S&P GSCI Enhanced and/or the S&P Dynamic methodology to maximise backwardation and minimise contango.
The Ossiam Risk Weighted Enhanced Commodity ex. Grains TR UCITS ETF 1C (USD) has a TER of 45 bps and is swap-based. Ossiam is also listing ETFs on the same index on Borsa Italiana, NYSE Euronext Paris and Xetra in Germany.
As of the end of August 2013, Ossiam managed a total of EUR911.7m (USD1.2bn).
The ETF is distributed and marketed in the UK through Natixis Global Asset Management.
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