Update: iShares EURO STOXX 50 UCITS ETF

Dieser ETF gibt Investoren einen Zugang zu den 50 grössten börsennotierten Unternehmen der Eurozone. Energie-, Versorger- und Bankentitel sind stärker gewichtet als bei den meisten aktiven Eurolandfonds, was diesen ETF zu einem Value-orientierten Investment macht.  

Hortense Bioy, CFA 12.12.2014

Rolle im Portfolio

This ETF is a suitable choice as a core portfolio building block. It offers broad exposure to many of the largest companies in the European Economic and Monetary Union (EMU). This fund can also be used as a tactical tool to overweight a portfolio's exposure to the currency bloc's equities.

The immense size of the companies in the index (their average market capitalisation is greater than EUR 30 billion) means that even with only 50 components, it captures nearly 60% of the total market value of all eurozone-listed companies. The exclusion of non-eurozone companies means the index has slightly greater sector and stock concentration compared to a broader European index like the STOXX Europe 600. Specifically, the EURO STOXX 50 has larger exposure to financials and consumer goods, but less exposure to healthcare.

Investors should also be aware that French and German companies make up more than two thirds of the EURO STOXX 50 Index. So integrating this regional fund into a portfolio that has existing exposure to France and/or Germany might result in substantial overlap.

Investors outside the eurozone should be mindful of the currency risk inherent in this euro-denominated fund. A weakening euro relative to the investor's home currency will negatively affect their return.

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Fundamentale Analyse

The Eurozone is arguably one of the biggest disappointing economic stories of 2014. The “slow but steady” economic recovery that many had anticipated has ground to a halt, while the probability that the currency bloc slips into its third recession since the 2008 financial crisis has increased. Meanwhile, disinflation and high unemployment remain key concerns.

 

Although the Eurozone economy faces its share of challenges, it should be noted that the components of EURO STOXX 50 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 will continue to benefit from the growth in emerging markets, even if it is expected to be more moderate going forward.

 

In any case, as of now, Eurozone equity market valuations continue to be primarily driven by monetary policy expectations. The Euro Stoxx 50 index has risen almost 60% since Draghi’s unequivocal pledge in the summer 2012 to “do whatever it takes” to preserve the euro, hovering around 2007 pre-crisis highs by end 2014.

 

The European Central Bank (ECB) has slashed interest rates, offered cheap long-term loans to banks and bought asset-backed securities and covered bonds in a bid to encourage banks to lend and boost domestic demand. President Mario Draghi has even pledged to implement more unconventional measures if needed, which investors have interpreted as full-scale QE (purchases of sovereign bonds).

 

The ECB also hopes its stimulus measures will further depreciate the euro --The euro has already fallen by about 10% in 2014 against the dollar. A weaker euro would help to boost competitiveness and combat deflation. The fall in commodity prices is making the ECB task much more difficult and therefore increases the chances of QE.  

However, there is only so much the ECB can do and Draghi has called on European political leaders to implement structural reforms such as improving labour market and fiscal policies. Countries that have undertaken reforms like Spain and Ireland are reaping the benefits. It’s now up to countries like Italy and France to do their part.

Against this background, Eurozone equity valuations will likely continue to be determined by monetary policy moves. The obvious risk is that if full-scale QE doesn’t materialise and the macro outlook doesn’t improve, equity markets might take a turn for the worse.

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Indexkonstruktion

The EURO STOXX 50 index includes 50 companies. To be eligible for inclusion a company must be headquartered in a country of the EMU. The index is weighted by free-float adjusted market capitalisation, with each component capped at a maximum of 10% of the index’s overall value. Full reviews are done in September of each year, but there are criteria which can turn over components sooner, such as a merger, bankruptcy or a constituent otherwise slipping from the ranks of the top 75. The financial sector is the biggest sector represented, comprising 24-28% of the index's value, followed by consumer goods (16-20%), and industrials (12-14%). French and German companies account for about 65-70% of the index. Spanish and Italian companies represent another 20-23% and the remainder is spread amongst another eight countries. The index is fairly well-balanced from a single stock perspective. Total is the largest component of the EURO STOXX 50 with a 4-6% weighting. The second and third largest stocks represented are Sanofi and Bayer.

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Fondskonstruktion

The fund uses full replication to track the performance of the EURO STOXX 50 net total return index. The fund buys all the securities within the index in the same weightings stipulated by the index. Dividends received from the underlying stocks are invested in EURO STOXX 50 futures until they are distributed to fund holders on a quarterly basis. This dividend treatment helps to maintain full index exposure and reduce cash drag. iShares engages in securities lending to generate additional revenues. Gross lending revenue is split 62.5/37.5 between the fund and lending agent BlackRock, with the latter covering all the operational costs. For the year ended September 2014, the net return to the fund was 0.07%. Although this activity helps to offset part of the fund's holding costs, it potentially exposes investors to counterparty risk. To protect the fund, borrowers are requested to post collateral greater than the loan value. About 3.4% of the fund’s net asset value (NAV) was lent out on average over the year ended September 2014, with a maximum on-loan level on any single day of 17.5%. The collateral, which consisted of a broad mix of European and US large-cap equities and bonds, was equivalent to 112% of the loaned securities value. As a general rule, the amount of assets that iShares ETFs are allowed by BlackRock to lend out at any one point in time is capped at 50%. As an additional safeguard, BlackRock provides a guarantee for its ETFs in the event of a borrower default – if a shortfall existed between the collateral and the cost to repurchase a loaned security, BlackRock would reimburse the fund in full.

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Gebühren

At 0.35%, this fund's TER sits at the high end of the range of ETFs tracking the EURO STOXX 50. Additional holding costs borne by the ETF investor per year include transaction and rebalancing costs. However, securities lending and tax optimisation help to offset all of these holding costs, as the positive tracking difference of this ETF (fund return – index return) over the past few years suggests. On top of holding costs, an ETF investor will typically have to pay trading costs, including bid-offer spreads and brokerage fees, when buy and sell orders are placed for ETF shares.

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Alternativen

As an alternative, investors can turn to the iShares Core EURO STOXX 50 ETF, which accumulates dividends. This fund charges a lower TER of 0.10%.

The EURO STOXX 50 is the most widely-tracked index to gain exposure to European equities, so there are plenty of alternatives available from multiple providers, including db X-trackers, HSBC, Amundi, ComStage, Source, Lyxor, UBS, and Deka. It should be noted that all of these ETFs outperform the EURO STOXX 50 net return index due to securities lending and differences in tax rates applied between the funds and the underlying index.

Investors looking for broader exposure to Eurozone equities, including large and mid-cap stocks, can consider ETFs tracking the MSCI EMU or the Euro Stoxx.

Other options, albeit less directly comparable, include ETFs that track broader European large cap indices such as the MSCI Europe and the STOXX Europe 600. These indices provide broader exposure to European equities. And again here, there is no shortage of options.

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Über den Autor

Hortense Bioy, CFA

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