Natixis Investment Managers’ affiliate Ossiam has listed the Ossiam Solactive Moody’s Analytics IG EUR Select Credit ETF on Euronext Paris.
This smart beta fixed income ETF aims to replicate the Solactive Moody’s Analytics IG EUR Select Credit Index which seeks to maximise the total return of a liquid and diversified selection of EUR-denominated investment grade corporate bonds, while maintaining a low credit risk profile.
Concretely, a liquid and investable bond portfolio is built from the components of the Solactive Euro IG Corporate Index (”investment universe”) which is first filtered to retain only the most liquid bonds.
Then a quality filter based on Moody’s Analytics Expected Default Frequency credit measures is applied to remove the bonds displaying the highest downside risk.
The last step compares the remaining bonds’ Option Adjusted Spread to their Moody’s Analytics Fair Value Spread to select the 100 most-undervalued bonds.
The Solactive Moody’s Analytics IG EUR Select Credit Index is equally-weighted, re-balanced quarterly and aims to maintain the same sector and duration exposure as the investment universe.
Bruno Poulin, CEO of Ossiam, said: “The Ossiam investment-grade credit strategy is aimed at long-term investors prioritising stable returns from high quality bonds issued by companies with strong business models in debt capital markets.
“While it is extremely difficult to make predictions of future credit market behaviour, a systematic investment strategy based on companies’ long-term performance, equity valuation and capital structure goes a long way towards providing investors with a rational basis for selecting high-grade corporate bonds.”
Timo Pfeiffer, head of Research at Solactive, added: “The Solactive Moody’s Analytics IG EUR Select Credit Index is a very unique index. Smart beta bond strategies have until now only represented a small share of the global demand for smart beta, which is dominated by equities.
“However, smart beta is becoming more and more prevalent in the fixed-income space and we are happy to contribute to this trend with this new index.”
David Munves, Managing Director at Moody’s Analytics, said: “EDF and Fair Value Spread metrics, contained in the Moody’s Analytics CreditEdge platform, are measures of credit risk and relative value, and are used by a large number of banks, insurance companies, fund managers and corporations.
“The launch of the Ossiam Solactive Moody’s Analytics IG EUR Select Credit ETF represents an important advance in the use of metrics from the CreditEdge platform by corporate bond investors and other market participants.”