Analyse/iShares FTSE MIB UCITS ETF

Die Zeiten ändern sich und die Anleger verändern sich mit ihnen: Heute werden Investments aus der Euro-Peripherie als Chance gesehen. So auch Italien-Aktien inklusive Banken wie Intesa und Unicredit.

Hortense Bioy, CFA 02.05.2014

Rolle im Portfolio

The iShares FTSE MIB fund provides broad exposure to Italian large-cap equities and can be used as a core building block for those looking to build a diversified Italian-centric portfolio. However, investors should be aware that the top four constituents account for about half of the total value of the FTSE MIB index. Financials is the top sector with a weight of 33-38%. 

This fund can also serve as a tactical tool for those looking to place a bet on the near-to-medium-term prospects of the Italian stock market under the belief that the it is undervalued. But as is the case with other European equity benchmarks, the FTSE MIB consists of truly global players which derive a large part of their revenues from their overseas activities. So, placing a tactical bet on this fund means taking a bet on the outlook for both the Italian and global economies. 

Investors outside of the eurozone considering buying this fund should be wary of currency risk.

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Fundamentale Analyse

Italy, together with Spain, has been one of the worst-performing European equity markets since the start of the financial crisis, with the FTSE MIB TR index losing about 63% of its market capitalisation from the pre-crisis highs of 2007 to the lows of mid-2012. Factors including the country’s dire economic situation and the poor health of its financial sector in the midst of Europe’s sovereign debt crisis severely impaired FTSE MIB companies’ valuations. However, with the easing of the crisis in H2-12 following the European Central Bank (ECB)’s unequivocal pledge to “do whatever it takes” to preserve the euro, the FTSE MIB has bounced back, registering a gain of about 40% from mid-2012 to end 2013.

Italian banks, which account for about about 22-25% of the index, rebounded on the back of cheaper access to international funding and decreasing dependence on ECB loans. However, they remain vulnerable with deteriorating asset quality, modest capital adequacy, and higher operational costs than the European average. 15 Italian banks, including Unicredit and Intesa Sanpaolo, will come under pressure this year with the ECB’s asset quality review. The subsequent stress test will determine which banks need to raise more capital and/or deleverage their balance sheets further.

Italy’s GDP is expected to have declined by around 2% in 2013, dragged down by subdued domestic demand, record-high unemployment and weak exports. A foreseen recovery from 2014 will be driven by a pickup in export growth. However, it will be very gradual and subject to several downside risks. Rising bad debts, tightening credit conditions and recession risk have driven the economy to a credit crunch, while political instability remains unresolved. Enrico Letta's left-right coalition remains weak after surviving a confidence vote in October 2013. A government collapse would likely affect investor confidence and reignite tensions in both the bond and equity markets.

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Indexkonstruktion

The FTSE/MIB (known as the S&P/MIB prior to June 2009) is the benchmark stock market index for the Italian equity market. Capturing approximately 80% of the domestic market’s capitalisation, the FTSE/MIB Index measures the performance of the 40 most liquid and best capitalised Italian shares and seeks to replicate the broad sector weights of the Italian stock market. The index was administered by Standard & Poor's from its inception until June 2009, when this responsibility was passed to FTSE Group, which is 50% owned by the Borsa Italiana's parent company London Stock Exchange Group. The index is fairly top-heavy with the top 10 stocks comprising 67- 70% of its weighting. The index’s top sector exposures include financials (33-38%), oil & gas (18-23%) and utilities (16-18%). The index’s largest constituent is ENI with a 14-16% weighting, followed by Unicredit and Generali.

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Fondskonstruktion

The iShares FTSE MIB uses physical replication method to track the performance of the FTSE MIB net total return index. The fund buys all the securities within the index in the same weightings stipulated by the index. iShares engages in securities lending, which generates additional revenues. Lending revenue generated by parent company BlackRock on behalf of the fund is split 60/40 between the fund and BlackRock, whereby BlackRock covers the costs resulting from the securities lending transactions (the net return to the fund was 0.16% for the year ended December 2013). Although this activity can help to partially offset the TER, it potentially exposes investors to counterparty risk. To protect the fund, iShares takes collateral greater than the loan value. Collateral margins vary from 102.5% to 112%, depending on the assets provided by the borrower as collateral. Data at the end of December 2013 reveals that about 14.75% of the fund’s NAV was lent out on average in the previous 12 months with a maximum percentage of the total NAV lent on any single day of 49.92%. As a general rule, the amount of assets that iShares funds are allowed by BlackRock to lend out at any one point in time is capped at 50%. As an additional protection measure, BlackRock provides borrower default indemnification, i.e. the company commits to replace the securities that any borrower would fail to return, but it will not cover losses incurred on the reinvestment of cash collateral. As of this writing, the collateral value is equivalent to 112% of the loaned securities’ value. Collateral is made up of a broad mix of global equities, with a majority of European stocks. Blackrock’s additional efforts to minimise counterparty risk include regular monitoring of counterparties' financial stability, ring-fencing the collateral in a third-party escrow account and marking the collateral’s value to market daily. The fund distributes dividends on a semi-annual basis.

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Gebühren

The fund has a total expense ratio (TER) of 0.35%, which is at the high-end of the range for ETFs tracking the FTSE MIB. Additional costs potentially borne by the fund shareholder but not included in the TER include rebalancing costs, and bid-ask spreads and brokerage fees when buy and sell orders are placed for ETF shares.

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Alternativen

There is no scarcity of alternatives for investors looking for exposure to Italian large cap equities. Providers including Lyxor, db X-trackers and Amundi offer their own FTSE MIB ETFs at TERs ranging from 0.18% to 0.35%. Amundi charges the lowest TER at 0.18%. Amundi also offers an ETF that tracks the MSCI Italy at a TER of 0.25%.

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Über den Autor Hortense Bioy, CFA

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