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Ossiam develops smart beta strategy for corporate bonds


Exchange-traded fund manager Ossiam has developed a smart beta strategy for investment in corporate bonds using Moody’s Analytics EDF (Expected Default Frequency) credit measures.

The strategy will be the first risk-based credit strategy specifically designed to provide systematic long-only exposure to a liquid portfolio of investment-grade corporate bonds.
The strategy will select bonds based on Moody’s Analytics forward-looking EDF, as well as other credit measures. The measures capture the credit insight of the equity markets and combine it with a detailed picture of each company's capital structure to produce a credit spread valuation framework.  This will help investors to access a credit benchmark with cost-efficient and liquid exposure to a high quality corporate credit sector.
Ossiam is the specialist smart beta investment manager and an affiliate of Natixis Global Asset Management (NGAM).
The selection methodology used creates a liquid and investable bond portfolio, taking advantage of Moody’s Analytics credit research in a systematic way. The new strategy will have the following features:
• Sound credit modelling techniques based on academic research, already tested in numerous industrial credit risk applications
• Selection of quality bonds that tend to be undervalued
• Integrated risk-management to prevent excess portfolio concentration and uncontrolled duration drift
• An easily replicable portfolio with intraday liquidity, for example via an ETF

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