Rolle im Portfolio
The Lyxor ETF MSCI EMU provides equity exposure to the Eurozone. Diversification benefits are limited as the index is highly correlated to international stock markets. The MSCI EMU Index correlated 95% with the MSCI Europe Index and 74% 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 31% and 33% of the index respectively and the MSCI EMU Index accounts for over 10% of the MSCI World Index.
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 this year.
The Eurozone’s sentiment index rose to 100 in December (98.4 in November) for the eight consecutive month, reaching a 2.5-year high. Full order books were the main driver behind the strong improvement. The sentiment index rose across the board, although the industrial sector posted the smallest uptick. The Eurozone’s retail sector is particularly expected to benefit from the improving economic environment. In fact, its sentiment sector index jumped 2.7 points – well above average. Eurozone GDP is expected to have grown by 0.2% q/q in Q4 2013, while the consensus forecast is for a similar performance in Q1 2014.
Despite the improvement in performance, the Eurozone’s unemployment rate remains at record-high of 12.1%, with youth unemployment as a key problem, particularly in the periphery. It must be noted that the labour market tends to react with a two-three quarter lag to GDP moves. On that basis, a mild decrease in jobless totals could be on the cards in coming months.
Overall risks to the Eurozone outlook remain biased to the downside. In particular, the Eurozone’s low inflation environment (0.8% y/y in December) raises deflation concerns. As the experience of Japan has shown, deflation could put a big brake on GDP growth. The ECB does not see major risks of deflation taking hold. However, it expects it to remain very subdued in coming years; forecasting an average of 1.1% and 1.3% for 2014 and 2015, respectively.
On a more national note, the German economy has improved considerably lately. The German manufacturing PMI rose to 54.3 in December from 52.7 a month earlier; marking its fastest pace since mid-2011. Exports rose by 0.3% m/m in November for the fourth consecutive month. Meanwhile, the number of people in work hit a new record high for the seventh consecutive year in 2013. The jobless rate has remained below 7% for the last two years. The strong labour market is particularly important for domestic demand, as the new grand coalition government hopes it will boost economic growth to compensate for the slowdown in some emerging markets and the still subdued demand from Germany’s Eurozone partners. The German Bundesbank expects GDP to grow by more than 0.5% in 2013 and by 1.7% and 1.5% for 2014 and 2015, respectively.
The Eurozone periphery has also shown signs of improvement. For example, Spain’s sentiment index jumped 4.0 points, reaching its long-term average of 100, while the pace of GDP growth has accelerated to 0.3% q/q in Q4 2013 from 0.1% in the previous quarter. This improved outlook has been felt in financial markets, with Spain, but also Ireland and Portugal, successfully raising money in the primary market with all auctions over-subscribed and allotted at multi-year low yields.
Indexkonstruktion
The MSCI EMU Index provides equity exposure to companies based in the European Economic and Monetary Union. The index is a free-float market capitalisation weighted index representing over 10 sectors across 11 countries. Component stocks have to fulfil MSCI’s size, liquidity and free float criteria to be included in the index. The index consists of around 240 stocks capturing about 85% of the total market capitalisation. MSCI uses the official exchange closing prices to calculate the index value. The index is reviewed on a semi-annual basis with minor quarterly reviews to accurate reflect the evolving marketplace. As of writing, the index is heavily biased towards France (33%), followed by Germany (31%) and Spain (11%). On a sector level, the index favours finance (23%), followed by industrials (14%) and consumer discretionary (13%). The biggest single issuer exposure is Total representing 3% of the index.
Fondskonstruktion
The Lyxor ETF MSCI EMU uses the synthetic replication method to track the MSCI EMU Index. To achieve this performance, the fund holds a basket of blue chip shares and enters an un-funded swap agreement with parent bank Societe Generale. The bank then gives away the performance of the MSCI EMU Index (net of fees) in exchange for the performance of the fund’s holdings. According to UCITS III regulations, individual counterparty risk exposure is limited to 10% of the fund’s NAV at any point in time. However, Lyxor has a daily target of zero swap exposure. Swaps are reset whenever their value becomes positive. They may sometimes have a negative value (between -2% and 0%), which would mean in this case that the fund owes the counterparty money. The fund’s holdings consist of highly liquid equities from OECD countries, the large majority of which are European. Lyxor does not engage in securities lending within the fund, which helps to minimise overall counterparty risk.
Gebühren
The fund levies a total expense ratio of 0.35%. This is in the middle of the range of ETFs tracking companies in the eurozone. Other potential costs associated with holding this fund which are not included in the TER include swap costs, bid-ask spreads and brokerage fees.
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%.
Investors more interested in a more like-for-like ETF can use the physical replicated iShares MSCI EMU which levies a TER of 0.33%. 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 (31%), followed by France (15%) and Germany (14%). On a sector level, the index favours financials (23%), followed by consumer goods (17%). 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 31% and 33% 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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