Rolle im Portfolio
The iShares MSCI Europe ETF is suitable for use as either a core portfolio building block or a tactical tool. It can be used as a core portfolio building block for investors seeking exposure to equity markets across developed Europe. As for its potential uses as a tactical tool, more aggressive investors could use this ETF to overweight European equities, or it can be shorted to bet against the performance of the underlying equities to hedge an existing position.The inclusion of Switzerland and the UK within the MSCI Europe index makes this ETF a somewhat more diversified option than a strict Eurozone equity benchmark. Still, at 0.95, the 3-year correlation between the MSCI Europe index and the MSCI EMU index has been very high. As such, there is little diversification benefit to using this fund in tandem with other vehicles tracking broad developed Europe benchmarks. Investors in the UK or Switzerland who already have exposure to their domestic equity market, perhaps through a FTSE 100- or SMI-following ETF, should take care not to unintentionally overweight their domestic exposure in their portfolio by adding this ETF.
Fundamentale Analyse
The economic outlook for the Europe has improved somewhat recently. Rising manufacturing activity, solid signs of recovery in southern parts of the Eurozone and a rebound of the Chinese economy are all encouraging signs for this year.
The Eurozone’s sentiment index rose to 100 in December (98.4 in November) for the eight consecutive month, reaching a 2.5-year high. Full order books were the main driver behind the strong improvement. The sentiment index rose across the board, although the industrial sector posted the smallest uptick. The Eurozone’s retail sector is particularly expected to benefit from the improving economic environment. In fact, its sentiment sector index jumped 2.7 points – well above average.
Despite the improvement in performance, the Eurozone’s unemployment rate remains at record-high of 12.1%, with youth unemployment as a key problem, particularly in the periphery. It must be noted that the labour market tends to react with a two-three quarter lag to GDP moves. On that basis, a mild decrease in jobless totals could be on the cards in coming months.
Overall risks to the Eurozone outlook remain biased to the downside. In particular, the Eurozone’s low inflation environment (0.8% y/y in December) raises deflation concerns. As the experience of Japan has shown, deflation could put a big brake on GDP growth. The ECB does not see major risks of deflation taking hold. However, it expects it to remain very subdued in coming years; forecasting an average of 1.1% and 1.3% for 2014 and 2015, respectively.
On a more national note, the German economy has improved considerably lately. The German manufacturing PMI rose to 54.3 in December from 52.7 a month earlier; marking its fastest pace since mid-2011. Meanwhile, the number of people in work hit a new record high for the seventh consecutive year in 2013. The jobless rate has remained below 7% for the last two years. The strong labour market is particularly important for domestic demand, as the new grand coalition government hopes it will boost economic growth to compensate for the slowdown in some emerging markets and the still subdued demand from Germany’s Eurozone partners.
The Eurozone periphery has also shown signs of improvement. For example, Spain’s sentiment index jumped 4.0 points, reaching its long-term average of 100, while the pace of GDP growth has accelerated to 0.3% q/q in Q4 2013 from 0.1% in the previous quarter. This improved outlook has been felt in financial markets, with Spain, but also Ireland and Portugal, successfully raising money in the primary market with all auctions over-subscribed and allotted at multi-year low yields.
Indexkonstruktion
The MSCI Europe Index includes approximately 85% of the equity market capitalisation of 16 countries across developed Europe. Components must meet minimum criteria for liquidity, as well as foreign ownership restrictions. The securities are weighed by free-float adjusted market capitalisation. Because closely held firms will have a smaller piece of their aggregate market capitalisation floated on public exchanges, the free float adjustment serves to ensure the underlying liquidity of the holdings is superior relative to a pure market capitalisation weighting. The index is reviewed four times a year. As of this writing, there are 436 stocks in the index. The index is not top-heavy, with about 20% of its total value comprised by the top ten constituents. The index has fairly limited sector concentration. The financial sector, the most represented sector in the index, represents 22% of the index’s value. With a 33% weighting, the UK is the most represented nation in the index and the only one to exceed a 15% weighting.
Fondskonstruktion
This ETF uses physical replication techniques to track the performance of the MSCI Europe Index. The fund holds all the constituents of the index. iShares may engage in securities lending within this fund to generate additional revenues for the fund. The lending revenues generated from this activity are split 60/40 between the fund and the lending agent BlackRock, whereby BlackRock covers the costs involved. To protect the fund from a borrower’s default, BlackRock takes collateral greater than the loan value. Collateral levels vary from 102.5% to 112% of the value of securities on loan, depending on the assets provided by the borrower as collateral. Additional counterparty risk mitigation measures include borrower default indemnification. Specifically, BlackRock commits to replace the securities that a borrower would fail to return. The indemnification arrangement is subject to changes, and in some cases without notice. Finally, BackRock limits the amount of assets that can be lent out by this ETF at 50%.Cash received as dividends from the underlying stocks is held in the fund’s income account until it is distributed to fund holders. Distributions are made on a quarterly basis. This dividend treatment can potentially create a drag on returns in upward trending markets as dividends are not reinvested into the fund. In practice this cuts both ways. It could also result in outperformance if the benchmark falls in the interim period.
Gebühren
The iShares MSCI Europe charges a total expense ratio (TER) of 0.33%. This lies in upper of the range of ETFs tracking pan-European indices. Other potential costs associated with holding this fund which are not included in the TER include rebalancing costs, bid-ask spreads and brokerage fees.
Alternativen
There are several ETFs offering European equity exposure, tracking different indices. The largest alternative in terms of total asset under management is the iShares STOXX Europe 600 (DE) ETF, which uses physical replication and levies a TER of 0.20%. The underlying index is very similar to the MSCI Europe Index in terms of sector and country exposure. However, the MSCI Europe Index has slightly fewer constituents. Investors look for a pure eurozone exposure can make use of the Lyxor ETF EURO STOXX 50. This ETF uses synthetic replication and levies a TER of 0.25%.
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