Rolle im Portfolio
The iShares MSCI EMU UCITS ETF offers broad-basket equity exposure to large and mid-cap companies domiciled within the European Monetary Union (EMU).
Due to its broad sector and geographic equity exposure, this ETF can be utilised as a core holding in a diversified portfolio.
The exclusion of non-EMU stocks from the benchmark index – most prominently UK and Swiss stocks - increases its geographic sector concentration compared to broader European indices such as the STOXX Europe 600. More specifically, the MSCI EMU overweights consumer discretionary, and underweights consumer staples and healthcare compared to the STOXX Europe 600. Despite these differences in country and sector exposure, the two indices have maintained nearly perfect positive correlation over the past 15 years (~0.99). Over the same timeframe, the MSCI EMU index has also exhibited a high historical correlation (~0.94) with the MSCI World index.
Fundamentale Analyse
Investors in Eurozone equities have a lot to thank the European Central Bank (ECB) for since the 2011-12 sovereign debt crisis which threatened to break up the Monetary Union. The MSCI EMU index has risen more than 70% since Draghi’s pledge in mid-2012 to “do whatever it takes” to preserve the euro. As of this writing, the MSCI EMU hovers below its 2007 pre-crisis highs.
The unprecedented quantitative easing (QE) programme unveiled by the ECB in January 2015 has given investors fresh reason to be optimistic about the region. The programme involves the buying of 60bn Euros of government bonds on a monthly basis until, at the earliest, September 2016. Full blown QE represents the latest, and most dramatic in a series of economic stimulus measures introduced by the ECB, including earlier asset buying initiatives (e.g. covered bonds) and successive interest rate cuts which have left lending rates hugging the zero bound. Such an enormous and sustained stimulus package, in conjunction with a falling euro and low energy prices, can be expected to boost price levels and stimulate growth.
In spite of a more positive domestic macro outlook, downside risks to Eurozone equity valuations remain. The potential for significant political tensions within the monetary union has resurfaced with the election of Syriza in Greece, who swept to power on an anti-austerity, debt-forgiveness ticket. The spectre of a ‘Grexit’ refuses to recede, and the resultant uncertainty continues to blight the Eurozone. This said, the risks of contagion within the monetary union appear to have subsided for the time being.
Elsewhere, although there have been signs of progress, the lack of wide-ranging structural reforms in countries like France and Italy remains a concern too. Fiscal discipline and relaxation of labour laws in these two countries are deemed essential if the ECB’s ultra-loose monetary policy is to be fully effective.
All this said; it should not be forgotten that a large portion of the MSCI EMU index are predominantly large, stable, high-quality companies which do a large amount of business internationally. Some of the largest index components are companies with a large presence in emerging markets -- Latin America in the case of Banco Santander, and Asia in the case of Unilever. These multinationals fortunes will be tied – at least in part - to those of emerging markets.
Indexkonstruktion
The MSCI EMU Index includes about 240 stocks representing approximately 85% of the free-float adjusted market capitalisation of all publicly-traded companies based in European Monetary Union countries. Eligible securities are weighed by free-float adjusted market capitalisation. The index is reviewed quarterly, with May and November semi-annual reviews tending to be more comprehensive than those undertaken in February and August. French and German equities make up 60-65% of the index by value. The top sector weighting is financial services (~23%) followed by consumer discretionary (~14%), industrials (~13%), and consumer staples (~10%). French oil and gas giant Total and chemical and pharmaceutical multi-nationals Bayer and Sanofi are the three largest index constituents, each maintaining around 3% of weighting.
Fondskonstruktion
This ETF physically replicates the performance of the MSCI EMU Net Total Return Index. It achieves this by holding all index constituents in their prescribed weights. This fund uses futures for cash equitisation purposes, which helps to reduce tracking error. This accumulating ETF reinvests all dividends paid out by the underlying stocks directly into the fund. This ETF engages in securities lending, which serves to generate additional revenue. The net return to the fund was 0.04% for the last 12 month to the end of June 2015. Over this period, the maximum percentage lent for this fund was 9.81%, while the average on-loan level was 4.62%.
Gebühren
The fund charges a management fee of 0.33%, which positions it towards the higher end of the range charged by rivals offering broad-basket EMU equity exposure. Moreover, the positive annual tracking difference (fund return – index return) since 2011 suggests that the TER is fully offset by revenues generated from efficient portfolio management techniques (e.g. securities lending) and through the use of tax optimisation (the fund enjoys a better withholding tax rate than the index). Additional costs to investors associated with trading the ETF include bid-ask spreads and brokerage fees.
Alternativen
There is no shortage of alternative MSCI EMU ETFs offered by providers such as UBS, Amundi, Lyxor, SPDR and ComStage.
Currently, of all the funds tracking the MSCI EMU Index, the UBS ETF MSCI EMU UCITS ETF charges the lowest management fee (TER of 0.23%) and is the most popular, as measured by assets under management.
Additionally, based on annualised tracking differences since 2011, both the UBS and iShares offerings have exhibited superior outperformance when compared with other funds tracking the reference index -- note that all European-domiciled MSCI EMU ETFs outperform the MSCI EMU net return index thanks to securities lending and tax optimisation.
Investors seeking alternative exposure to the large/mid-cap EMU equity sector may also consider ETFs from EasyETF, iShares and Lyxor tracking the Euro Stoxx index, which tracks around 300 of the largest EMU stocks.
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