BlackRock’s ETF specialist division iShares has launched a new fund that invests in equities of large- and mid-sized European companies.
The fund has the option of a US dollar currency hedge and tracks the MSCI index. It contains close to 240 stocks from 10 developed countries within the European Economic and Monetary Union (EMU).
The impact of the euro fluctuations can have a direct impact on total returns. In order to reduce this, the fund uses a US dollar hedge, which is accomplished through one-month foreign exchange forward contracts, according to iShares.
The ETF offers investors flexibility to opt for hedged or unhedged exposures – or a combination of both – in their international portfolios. It also buys and holds the underlying stocks, and hasa total expense ratio of 0.38 per cent. It comprises stocks from France, Germany, Spain, the Netherlands, Italy, Belgium, Finland, Ireland, Austria and Portugal.
The fund’s highest allocation is in the financials sector with 23.71 per cent, followed by consumer discretionary at 14.91 per cent. Other sectors in the list include industrials, consumer staples, and healthcare, among others.
This is iShares’ first US dollar hedged European equities fund and it brings the total number of currency-hedged ETFs under the iShares banner in Europe to 14.
www.ishares.com
Comment:
BlackRock’s latest exchange-traded product landscape report suggests pan-European equity ETFs have been one of the industry’s most popular asset classes in 2015.
With the European Central Bank announcing its quantitative easing programme earlier this year, the European equity ETF space attracted $42.1bn in new money during the first five months of 2015.
But fluctuations in the euro can eat into gains and are a concern for most investors. The US dollar-hedged ETF should reduce the risk of fluctuations impacting returns. This product may be good for investors who are looking to invest in European stocks in a risk-managed fashion. But iShares has 14 currency-hedged ETFs and has managed some of these for over a decade so investors can hope it is able to manage their risks for better returns.
