Barclays’ Shiller CAPE range gains traction in Europe via Natixis’s Ossiam

Barclays has licensed the Shiller Barclays CAPE Europe Sector Value Index specialist investment manager Ossiam, owned by Natixis, to sell a new exchange-traded fund (ETF) to be marketed in Europe.

The UCITS-compliant ETF is in the process of being passported in various European countries and listed on multiple exchanges.

“We have had good success with our Shiller Barclays CAPE range of indices,” said Fabien Labouret, head of quantitative investment strategies at Barclays. “We launched the Shiller Barclays CAPE US Family, which look at the S&P select sector indices, in September 2012 and the Europe family looking at the MSCI sector indices one year later in August 2013. The range is now completed with Asia ex-Japan and Japanese versions.”

According to Labouret, the US and Europe versions have seen significant traction and have been sold in various formats with significant deals lined up for the Japanese version in the pipelines.

“In total and globally, the indices have attracted about $2bn in assets under management (AUM),” he said.

The Shiller Barclays CAPE indices, developed jointly by Barclays and Professor Robert Shiller of Yale University, use the cyclically adjusted price-to-earnings (CAPE) ratio as a key valuation driver in a sector rotational strategy. The indices are designed to offer large-cap equity market exposure with a value bias and are intended for buy-and-hold investors with a multi-year investment horizon.

Value investing
Labouret said that value investing has been on the top of investors' agendas for a some time now and that the Shiller Barclays CAPE range had benefited from the fact that it has strong academic research backing.

“The indices are designed to offer equity market exposure with a value bias by systematically identifying and allocating to the four undervalued sectors with the most positive momentum, out of a universe of ten sectors,” he said, adding that US investors are familiar with Shiller’s strategies. “Institutional investors and pension funds in the US have been using the cyclically adjusted PE ratio developed by Professor Robert Shiller and John Y. Campbell since the 1980s.”

However, said Labouret, Barclays has revived that interest by including the CAPE ratio in a rules-based index which has been well received by the pension community.

“The fact that the index is designed to capture value over the long term makes it more suitable for funds and longer-dated structured products,” said Labouret.

Regional sales
In Japan, said Labouret, the index has had more traction in the retail investing community. “The Japanese Shinko-Shiller CAPE US and European Equity Strategic Fund, which launched in March 2014 is a combination of the European and US indices,” he said. “[This version] raised over $630m in the retail market in a matter of three weeks which shows the weight of having an academic backing the index although the main characteristic of the index is that it is fundamentally driven.”

In Europe, said Labouret, Barclays has targeted institutional managers and the ETF market. “This was an obvious avenue given that the indices offer daily liquidity and the ETF format is the most appropriate vehicle to capture this audience,” he said. “Despite the ETF market still being narrow in Europe we do have plans to continue tapping into this space.”

Other benchmarks
Aside from the Shiller CAPE range which is being expanded, said Labouret, Barclays has been investing in developing a full range of equity factor indices (low volatility, momentum, quality and value) and he said that demand continues to grow around these indices.

“We are also developing a new family of Shiller indices that will be brought to market in Q1 or Q2 this year,” he said. “Last year, our smart beta equity indices and smart carry commodities drove sales, but we remain committed to a cross-asset set-up so that we can provide indices that extract value from other asset classes such as credit, rates and FX.”

In addition, said Labouret, Barclays will continue to approach the ETN market in the US as a core market to leverage the bank’s distribution capabilities via its ETN+ platform, “like we did in the volatility and MLP space where Barclays has been very successful”.

The Shiller Barclays CAPE Index Family is calculated and published by the Barclays Risk Analytics and Index Solutions (BRAIS) Ltd team, part of Barclays’ global research team.