iShares MSCI EMU Large Cap UCITS ETF

Dieser gut 100 Aktien umfassende ETF ist eine deutlich breiter aufgestellte Alternative zum EURO STOXX 50. Hohe Konzentration deutscher und französischer Werte ist jedoch zu beachten.

Rolle im Portfolio

The iShares MSCI EMU Large Cap provides equity exposure to Eurozone large cap companies. Diversification benefits are limited as the index is highly correlated to international stock markets. The MSCI EMU Large Cap Index correlated 95% with the MSCI Europe Index and 89% with the MSCI World Index over the last three years.

Given the exposure across countries and sectors, the ETF is best deployed as part of a core strategy within a well-diversified portfolio. As the index is tracking the Eurozone only, investors can also use the ETF as a tactical call on the recovery of the Eurozone.

The ETF is suitable for investors seeking a core holding for building a portfolio. Investors with a strong view on the eurozone can also use the ETF to overweight that region, especially if they favour France and Germany but still preferring a more diversified approach.

Before considering an investment, investors should review their existing holdings, especially on a country level, to avoid unintentionally overweighting this region. Germany and France represent each 34% of the index respectively and the MSCI EMU Large Cap Index accounts for over 10% of the MSCI World Index.

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Fundamentale Analyse

The economic outlook for the Eurozone 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 the rest of the year.

Economic data have been on the upside lately. Eurozone industrial output rose by 0.7% in June and by 2.5% in Germany alone. Although unemployment in the Eurozone came down a notch in July, at 12.1% the jobless rate remained at its highest level since the euro’s creation. By contrast, unemployment in Germany stood at a low 5.3%. Key survey data indicate that the Eurozone recovery is extending from the core to the weaker periphery, mainly benefiting export growth. The PMI for the Eurozone hit a 26-month high in August at 51.4, with Germany’s, Spain’s and Italy’s PMI reaching 25-27-month highs above the 50-expansion line. Greece’s PMI data was also encouraging, hitting a 44-month high at 48.7. In addition, German business sentiment posted a new one-year high at 107.5 in August; up from 106.2 the previous month. Corporations are increasingly optimistic on the near future, as some southern Eurozone countries begin to recover and China regains some of the momentum it lost in the first half of the year.

The closely followed ZEW Index has also added to the positive momentum. This economic sentiment indicator rose to 42.0 in August – its highest level since March. The institute commented that first signs of an end of the recession in important Eurozone countries may have contributed to this increase. In addition, economic optimism is also supported by strong domestic demand in Germany.

In fact, Germany’s GDP rebounded strongly in Q2, posting a 0.7% q/q increase. France also surprised to the upside with a 0.5% q/q rise, while the Eurozone as a whole recorded its first ever GDP expansion (0.3% q/q) after six consecutive quarters of recession. Some economists have raised concerns that this momentum may be difficult to maintain. In particular, they highlight that the upsurge in construction activities in Q2 was the result of works due in Q1 and postponed by severe weather conditions. For example, the OECD expects GDP growth in Germany, France and Italy to slow down somewhat in Q3. And yet, overall, the consensus view is for the Eurozone to continue building positive momentum into 2014.

Going forward, improving economic indicators for Europe, especially the southern parts, raise hopes that Europe’s slow recovery is gaining momentum. Overall, market consensus points towards a stronger second half of the year. Barring major surprises, upcoming elections in Germany should not pose a meaningful risk to this outlook.

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Indexkonstruktion

The MSCI EMU Large Cap NR USD index includes approximately 70% of the free-float adjusted market capitalisation of all publicly-traded companies from European Monetary Union countries. Components must meet minimum criteria for liquidity, foreign ownership, as well as a waiting period for newly-listed stocks. 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 quarterly, with the semi-annual reviews scheduled for May and November more comprehensive than the February and August reviews. As of this writing, there are 113 companies included in the index. French and German equities make up almost 70% of the index. The top sector weighting is financials, which accounts for 22% of the index.

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Fondskonstruktion

This ETF uses physical replication techniques to track the performance of the MSCI EMU Large Cap 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.

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Gebühren

The ETF has a total expense ratio (TER) of 0.50%, which is at the top end of the range for ETFs tracking the MSCI EMU Large Cap Index. Other potential costs associated with holding this fund which are not included in the TER include rebalancing costs, bid-ask spreads and brokerage fees.

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Alternativen

As of writing, there are many ETFs tracking equities in the euro zone. The largest in terms of total asset under management is the iShares EURO STOXX 50. iShares uses physical replication and levies a total expense ratio of 0.35%.

A more like-for-like alternative is offered by UBS. The UBS-ETF MSCI EMU uses full replication and levies a TER of 0.40% for the retail class and a TER of 0.23% of its institutional share class. For a pan-European exposure, investors can invest in the iShares STOXX Europe 600 ETF. The index offers exposure to the 600 largest stocks from European developed countries and is biased towards the UK (29%), followed by France (15%) and Switzerland (15%). On a sector level, the index favours banks (13%), followed by health care (11%). iShares uses physical replication to achieve its objectives and levies a total expense ratio of 0.20%.

Investors planning to drive a more aggressive strategy can invest in the single country ETFs of Germany and France as they represent each 34% of the index respectively. The largest in terms of asset under management are the iShares DAX ETF and the Lyxor ETF CAC 40.

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Über den Autor

Gordon Rose, CIIA, CAIA,

Gordon Rose, CIIA, CAIA,  ist Fondsanalyst bei Morningstar.

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