Update: iShares SLI

Dieser für Anlagefonds optimierte Index weist eine größere Diversifikation mit Blick auf die Einzeltitelebene auf als der Leitindex SMI. Dennoch ist auch der SLI sehr kopflastig, und auf Branchenebene dominieren Financials und Health Care.

Hortense Bioy, CFA 29.04.2016

Rolle im Portfolio

This fund provides exposure to Swiss large-cap stocks, some of which are also the biggest in Europe. As such, this fund can be used as a core holding. This fund can also be implemented as a tactical tool to give an overweighting to Swiss large-cap equities within a diversified portfolio under the belief this market is undervalued given its near-to-medium-term prospects.

The Swiss Leader Index can be used as an alternative to the Swiss Market Index, a better-known benchmark for Swiss equities. The SLI offers greater single stock and sector diversification relative to the SMI thanks to a capping mechanism, which limits the weighting of each of the four largest constituents to 9% of the index’s value, while the weighting of all other securities is capped at 4.5%. However, investors should be aware that the SLI remains fairly top-heavy, with the top 10 constituents accounting for about 63% of its value. Financials and healthcare are the index’s top sectors, representing a combined 50% of the index’s value.

For non-Swiss investors, this fund can also serve as a diversifier within a broad pan-European portfolio by providing exposure to arguably one of the world’s most stable and strongest currencies. However, non-Swiss investors should be mindful that a strengthening franc will enhance the return of this fund as denominated in their home currencies, but a weakening franc will weigh on its performance.

Fundamentale Analyse

The SLI consists of many high-quality companies that boast sustainable competitive advantages, or wide economic moats, by virtue of having either exclusive patents or well-recognised brand names. These include not only multinationals like Nestle, Richemont, or Swatch but also defensive heavyweights like Novartis and Roche, which are able to maintain a competitive advantage with their portfolio of patented drugs and robust R&D budgets that support new drug discovery.

Thanks to their high value-added nature, these companies weathered the global financial and economic crisis better than many others. They also showed resilience to the strong franc, which, driven by its safe-haven status, appreciated considerably after the crisis.

In an effort to contain franc appreciation, support growth, and prevent sustained deflation, the Swiss National Bank introduced a CHF/EUR 1.20 FX peg target in September 2011. In January 2015, the SNB took many by surprise by dropping the peg, and, to discourage Swiss franc appreciation, the bank also cut interest rates to negative 0.75%. This negative rate setup remains in place as of this writing.

Swiss monetary policy settings are likely to be kept in ultraloose mode for a very protracted period, not least given the European Central Bank's equally ultraloose stance. The Swiss franc, nevertheless, is still too strong and continues to weigh on exporters, especially those that generate most of their sales outside Switzerland but manufacture domestically.

Another source of concerns for Swiss companies is the slowdown in emerging markets and particularly China. Swiss companies have increased their exports to China and are now more dependent than ever on its economic growth. The world’s number-two economy continues to post robust growth rates of 6%-7%, but this is lower than what the world had become accustomed to.

Indexkonstruktion

The Swiss Leader Index consists of the 30 largest and most liquid stocks listed on the Swiss stock exchange. As such, the SLI is composed of the SMI stocks plus the 10 largest stocks in the SMIM. The SLI has a capping mechanism. The four largest shares are each capped at 9% of the index’s value, and, where necessary, the weighting of the other securities is limited to 4.5%. Because the weightings change continuously, SIX Swiss Exchange calculates and adjusts the capping factor every three months. The financial and healthcare sectors are the most heavily weighted, representing about 26%-29% and 23%-26% of the index's value, respectively, followed by industrials (13%-16%) and consumer staples (9%-13%). The top four constituents are Roche, Novartis, Nestle, and UBS, each comprising between 8% and 10% of the index’s value.

Fondskonstruktion

The fund uses full replication to track the performance of the SLI on a total return basis. The fund owns the securities within the index. Dividends (including withholding receivables) are reinvested in both the SLI constituents and SLI futures depending on the amount and time frame until the next distribution date. The fund may engage in securities lending but at the time of this writing no information related to it was made available on the company website. While securities lending can help generate additional revenue, it also introduces counterparty risk. To protect the fund, the borrowers are requested to post collateral. It is worth noting that this Switzerland-domiciled fund is not compliant with UCITS and therefore is only authorised for commercial distribution in Switzerland and Liechtenstein.

Gebühren

The fund levies a total expense ratio of 0.35%, which is at the top end of the range for exchange-traded funds tracking Swiss equities. Moreover, the tracking difference (fund return - index return) over the past few years suggests that the total holding cost is higher than the total expense ratio. On top of holding costs, ETF investors will typically be charged trading costs, including bid-offer spreads and brokerage commissions, when buy and sell orders are placed for ETF shares.

Alternativen

UBS and db x-trackers also offer directly comparable alternatives at total expense ratios of 0.20% and 0.35%, respectively. The UBS ETF (CH) SLI is the cheapest and best-performing ETF tracking the SLI.

As an alternative to the SLI, investors can turn to the SMI, a more popular benchmark for the Swiss stock market. However, the SMI, which includes 20 of the largest and most liquid stocks listed in Switzerland, has a much higher degree of single stock and sector concentration. The top five constituents account for about 70% of the index’s value. A handful of providers, including iShares, sb X-trackers, UBS, and Comstage have an ETF tracking the SMI. The cheapest (strictly in terms of total expense ratio) is the UBS fund with a total expense ratio of 0.20%.

Also, those looking for broader market exposure could consider ETFs tracking the Swiss Performance Index, which is composed of large, mid-, and small caps. The iShares Core SPI (CH) charges a total expense ratio of 0.10%.

Über den Autor Hortense Bioy, CFA

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