Analyse: Amundi ETF CAC 40

Mit diesem ETF können Anleger eine taktische Wette auf einen günstig bewerteten Markt fahren. Konsum- und Finanztitel im Fokus.

Hortense Bioy, CFA 22.03.2013

Rolle im Portfolio

The Amundi ETF CAC 40 (C), which provides low-cost exposure to French large-cap equities, can be used as a core holding. Investing in this well-diversified fund could appeal to investors looking to build a French-centric portfolio. However, it should be noted that the performance of the CAC 40 is closely correlated to international indices. Over the past five years, the CAC 40 has shown a 98% correlation to the widely-held EURO STOXX 50--which has a 40% weighting in French equities. The CAC 40 has shown an 88% correlation to the MSCI World over the same period. This reflects the fact that some of the largest constituents of the French index, such as Total and Sanofi-Aventis, are truly global players with 70 to 90% of their revenues coming from outside France.

The Amundi ETF CAC 40 (C) can also act as a tactical tool to overweight French equities within a diversified portfolio. It could be useful for those who want to place a bet on the near-to-medium-term prospects of the French market under the belief that the benchmark index is undervalued. However, it is important for investors to examine the index’s constituents. Like many country indices, the CAC 40 is fairly top heavy, with the top 10 constituents accounting for about 55% of its weighting. The consumer discretionary sector is currently the largest sector represented with a 17-19% weighting, while financial companies account for about 15-17% of the index's capitalisation.

Investors outside of the Eurozone looking at this euro-denominated fund should be aware of currency risk. A weakening euro, as witnessed since the start of the sovereign debt crisis, will weigh on the return.

Fundamentale Analyse

While many European countries struggled during the global financial crisis, France held its position fairly well, helped by the relative resilience of domestic consumer spending, a large public sector, and by virtue of being less exposed to the downturn in global demand than some other countries. Nonetheless, the second largest economy in the Eurozone contracted in 2009, though subsequently recovered somewhat in 2010 and 2011. However, the unemployment rate has increased, now exceeding the 10% mark, and public finances have deteriorated as a result of the government’s pursuit of aggressive stimulus and investment measures in response to the economic crisis.

French GDP dropped 0.3% q/q in Q4-12 and showed zero growth for the year as a whole. France, like others in the Eurozone, was affected by the region’s sovereign debt crisis and the slowdown in global economic conditions in 2012. Yet, while neighbouring Germany is showing signs of recovery in confidence, exports and manufacturing, France’s ruling President Francois Hollande is struggling with shrinking private investment, rising job cuts, weakening competitiveness abroad, alongside pressing deleveraging and government retrenchment. After heaping a series of tax hikes and spending cuts to address the worsening fiscal situation, the government has decided against enacting more austerity measures in 2013 as they would slow growth even further and prove counterproductive. It has also dropped its pledge to bring the budget deficit down to 3% of GDP by the end of 2013, from 4.5% at the end of 2012.

Despite this negative economic picture, the French stock market, as measured by the CAC 40 GR index, fared well in 2012, with a gain of 20.4%. It registered the second best performance in Europe, after the DAX. This was partly on the back of the perceived attractiveness of French stocks relative to their underlying fundamentals following a loss in valuation of roughly 14% since the end of 2009, but also on improved overall sentiment towards equities amid an easing of the Eurozone debt crisis since the ECB President Draghi’s pledge “to do whatever it takes” to preserve the euro.

In the long-term, the diversified selection of high-quality French companies which make up the CAC 40 should deliver adequate returns relative to the level of risk assumed by investors. These companies are not only dominant in France, but also market leaders abroad, as exemplified by Total, the world’s fifth largest oil producer, and BNP Paribas, Europe’s biggest bank in terms of assets. In fact, an estimated 70% of CAC40 companies’ profits are generated outside of France. The majority of these companies are well-positioned to benefit from continued growth in emerging markets like China where multinationals such as LVMH and Pernod Ricard are expanding at a rapid clip.

Indexkonstruktion

The CAC 40 is the benchmark index of the French stock market. It is a capitalisation-weighted measure of the top 40 equities among the 100 largest publicly listed companies on the Paris stock exchange. The index’s composition is reviewed quarterly. At each review date, the companies listed on Euronext Paris are ranked according to free float market capitalisation and share turnover over the prior 12 months. Each component’s weighting in the index is capped at 15%. The consumer discretionary sector is the most heavily weighted (17-19%), followed by energy (12-15%), industrials (15-17%), and financials (15-17%). The index looks fairly well-diversified from the perspective of individual names. Sanofi-Aventis and Total are the largest constituents with a 11-13% weighting each. The third largest stock represented is BNP Paribas.

Fondskonstruktion

The Amundi ETF CAC 40 (C) uses physical replication to track the performance of the CAC 40 net total return index. The fund buys all the securities within the index, in the same weightings as in the index. Amundi may engage lend out up to 22% of the fund’s assets to help generate extra revenue. The lending revenue is split 60/40 between the fund and Amundi. Although this activity can help to partially offset the TER, it potentially exposes investors to counterparty risk. To protect the fund, Amundi takes collateral to which haircuts are applied (10% for equities, 7% for bonds and 5% for cash). All the dividends paid out by the CAC 40 holdings are reinvested net of tax into the index until they are distributed once a year to fund holders.

Gebühren

At 0.25%, this fund’s total expense ratio (TER) is consistent with those elsewhere in the market for ETFs tracking the CAC 40. Additional costs potentially borne by the ETF holders but not included in the TER include rebalancing costs, tax, bid-offer spread and brokerage commissions when buy and sell orders are placed for ETF shares.

Alternativen

As an alternative, income-seeking investors can turn to Amundi ETF CAC 40 (D), which distributes dividends.

There is no shortage of alternative ETFs tracking the French benchmark. Most providers, including Lyxor, EasyETF, HSBC and charge identical TERs (0.25%). The Lyxor ETF CAC 40 A is the largest CAC 40 ETF as measured by assets under management and the most heavily-traded on Euronext Paris as measured by the 3-month average daily volume. This high level of exchange liquidity is a positive feature that allows investors to benefit from tight bid-ask spreads, thereby reducing transaction costs. db x-trackers and ComStage offer cheaper alternatives with at an expense ratio of 0.20%, but this lower annual fee may come at the expense of lower liquidity.

Investors interested in a more diversified exposure to the French benchmark can look at the Ossiam ETF CAC 40 Equal Weight NR. By attributing the same weight to each of the CAC 40 constituents, the fund seeks to avoid concentration effects. It charges an expense ratio of 0.30%.

 

Über den Autor Hortense Bioy, CFA

Hortense Bioy, CFA  is director of passive fund research in Europe.