BlackRock has broadened its range of exchange-traded funds with the launch of four strategies with exposure to the factors within the US equity market.
The iShares Edge MSCI USA Value Factor Ucits ETF is focused on exposure to stocks that are considered by the fund house as undervalued based on their fundamentals.
Meanwhile, iShares Edge MSCI USA Size Factor Ucits ETF is skewed to smaller capitalisation companies within the MSCI USA investment universe.
As its name suggest, iShares Edge MSCI USA Momentum Factor Ucits ETF invests in stocks that exhibit the strongest risk-adjusted performance over the last six and 12 months, and the iShares Edge MSCI USA Quality Factor Ucits ETF offers access to companies with strong balance sheets and stable earnings.
The fund house said factor investing can help investors pursue specific outcomes, such as reducing risk or outperforming the market.
The investment products are physically replicating – meaning they buy the securities of the index – and each has a total expense ratio of 0.20 per cent.
It has been a busy period for BlackRock when it comes to product launches. In September, the fund house launched four thematic ETFs to capture investment opportunities created by the global trends towards an ageing population, healthcare innovation, robotics and automation, and digitisation.
Provider view
Manuela Sperandeo, head of iShares EMEA specialist sales at BlackRock, said: “Faced with growing political uncertainty, market volatility and low yields, investors tell us that they want a comprehensive set of tools with which to diversify risk in their portfolios.
“Different factors tend to perform in different market environments, and these four funds complement our European equity and global equity factor range allowing investors to express their views on the major global developed equity markets.”
Adviser view
Robin Keyte, director of Somerset-based Keyte Chartered Financial Planners, said: “With focus on factors like value and quality, it seems that BlackRock is attempting to bring aspects of active management and merge them with a passive strategy to have wider appeal.
“There are plenty of open-ended investment company trackers that are priced below 1 per cent, so a 0.2 per cent charge is not exceptional these days. I think a lot of people like using ETFs because they are not well publicised, they are cheaper than traditional investments, and they are highly liquid. Its liquid nature means that these funds can be subject to high volatility.
“I think there is a downward pressure on fund charges and MiFID II will help in keeping that pressure applied because it will force fund managers to disclose all fund costs. A lot of funds do not disclose stamp duty costs for example.”
Charges
TER of 0.20 per cent.
Verdict
US equities have performed well in recent history and many UK investors who have been exposed to the market have been reaping the benefit that have come with the strengthening of the dollar and the weakening of the pound. Exposure to a burgeoning market at a cost which is substantially lower than that of a traditional active investment is likely to generate a demand for the four funds.
However, as Mr Keyte quite rightly points out, ETFs are highly volatile – given the liquidity of the investment product. What is more, the strategy is not protected by the Financial Services Compensation Scheme and there is therefore an absence of a safety net for investors should the worst case scenario become reality.
