The strategy leverages the Cyclically Adjusted Price Earnings (“CAPE®”) ratio, a metric introduced by Professor Robert Shiller in 1988 to improve the classical PE ratio. Using a 10-year horizon, the CAPE® seeks to detect long-term over and under-valuations in the stock market.
The philosophy
An approach that provides exposure to US equities through dynamic sector rotation based on the CAPE® ratio developed by Professor Robert Shiller aiming at selecting potentially undervalued sectors.
Reasons to consider
To take into account idiosyncratic differences between sectors, the strategy invests each month in the four equity sectors that appear cheap compared to their historical valuations, given by the relative CAPE® ratio.
The strategy selects the five sectors with the lowest CAPE® ratio. In order to avoid the one sector that appear cheap for good reasons, the strategy excludes the sector with the lowest momentum. This filter has brought value to the strategy’s performance.
The strategy aims to deliver excess return, irrespective of market regime. This is because, even if the CAPE investing concept follows a value approach, the alpha does not come from a strong exposure to a specific premium like value or growth, but from the sector selection process itself.
“Our US sector rotation strategy aims to deliver “pure” alpha, unexplained by traditional factors, in a consistent manner”
– Luc Dumontier, Head of Investments and Operations, Ossiam
The analyses and opinions referenced herein represent the subjective views of the author(s) as referenced, are as of the date shown and are subject to change without prior notice.
Risks to consider
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. There could be other differences across similar products in the same strategy. Investors should fully understand the risks and other relevant details associated with any investment prior to investing. References to a ranking, prize or label do not anticipate the future results of the latter, or of any relevant fund or strategy, or of the manager.
The team
Experienced investment team
Luc Dumontier
Head of Investments and Operations
Ossiam
Tristan Perret
Co-Head of Investment Management & Research
Ossiam
The firm
Ossiam is a Paris-based asset manager focused on quantitative and systematic investment solutions since 2009 with a distinct vision: providing clear, transparent access to quantitative, research-based strategies. Ossiam is built on 3 main pillars:
1. Smart
Research is at the center of Ossiam’s values. Leveraging on our quantitative capabilities, we develop systematic, innovative investment methodologies across asset classes, geographies, investment styles and legal wrappers.
2. Sustainable
As a UNPRI signatory since 2016, we believe responsible investing plays a fundamental role in delivering improved, physical outcomes for the society and the environment. By combining a quantitative, data-driven approach with active engagement, we aim to offer some strategies that balance ambitious ESG objectives with predefined risk-return profiles.
3. Solutions
Our strategies are designed to provide specific outcomes for ongoing investment issues in a transparent, liquid way. This often implies a balance between efficiency and real-life constraints.
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