ETF specialist Elston Consulting has licensed its Elston Strategic Beta Global Minimum Volatility index (ticker ESBGMV) to Commerzbank for the creation of an investable certificate that tracks this index.
The certificate is issued with an initial notional of £10m.
Whereas most Min Volatility indices relate to a single asset class such as Global Equities, Elston’s approach was to launch an index that targeted the minimum volatility portfolio created from a globally diversified range of asset classes represented by low cost iShares exchange traded funds (ETFs).
The objective of providing diversified, differentiated returns with downside risk mitigation makes this strategy similar in portfolio function to a hedge fund. Constructing this alternative strategy using a dynamically rebalanced mix of ETFs brings the benefit of transparency, liquidity and lower cost, the firm said.
This is why strategies of this nature are sometimes referred to as “Liquid Alternatives”.
Elston said transparency comes from the rules-based approach of the index. Liquidity comes from the nature of the underlying securities, and lower cost comes from the use of ETFs as the building blocks of the strategy.
Whereas all Elston’s ETF Portfolio strategies are available for licensing to asset managers and financial advisers, the launch of a certificate by Commerzbank makes it convenient for those wishing to access this dynamic strategy with a single holding.
The certificate is available to private banks and discretionary investment managers seeking a lower cost more transparent and liquid alternative to hedge funds.
Ranye Lu, quant & index strategist at Elston Consulting, said: “This index has been tested through some volatile times in the last two years, and we are satisfied that it has delivered in line with its design brief. It is always important that the strategies we develop are readily investable, so we are delighted that Commerzbank is licensing the index to launch these certificates.”
“We have been in discussions with Elston since this index launched, and are delighted to see it reach its two year anniversary,’ said Christopher Hughes, head of structured solutions, Commerzbank.
“Our certificate is issued under our popular German programme and the security gives investors a convenient way to access a dynamic multi-asset strategy through a single holding. Additionally we have scope to hedge returns of the index into major currencies.”
Joe Parkin, head of iShares Wealth & Retail UK Sales at BlackRock, added: “We aim to offer a broad range of ETFs with different characteristics as building blocks for smarter investment strategies. We welcome innovation of this kind that makes alternative investment strategies more broadly and cost-efficiently available.”