Rolle im Portfolio
The iShares MSCI America ETF provides equity exposure to North America. The ETF is best deployed as a core holding in a well diversified portfolio. Given the size of the region’s economy, the high correlation of the MSCI North America index with international stock markets comes at no surprise; hence the benefits of this fund as a diversifier within a broader equity allocation are limited. The index correlated 98% with the MSCI World Index and 85% with the STOXX Europe 600 Index over the last three years.
As the index primarily invests in large caps, the ETF can be used to complement mid and small cap holdings in a well diversified portfolio.
Before considering an investment, investors should review their existing portfolio holdings to avoid unintentionally overweighting North American equities; in particular US shares. Given the size and the importance of its economy, the US represents a big portion of any product providing global or developed equity exposure. For instance, the MSCI North America Index accounts for about 60% of the broader MSCI World Index.
Fundamentale Analyse
Morningstar equity analysts see the overall US stock market close to fair value and as such don’t see much room for strong growth. However, there is some potential for positive surprises from earnings growth.
The US government technically avoided the feared “fiscal cliff” at the turn of the year with a last minute compromise on tax increases and spending cuts. However, the deal still implies a tightening of fiscal policy in 2013 which could negatively impact growth. Besides, uncertainty has not fully disappeared as the US Congress needs to agree on further spending cuts by March in order to lift the country’s debt ceiling, thus putting further pressure on the economic outlook.
In spite of these fiscal issues, the recent trend in the US unemployment has added some positive tone to the economic outlook. After peaking in 2009, unemployment has steadily dropped and currently stands at 7.8%. Encouragingly, long-term unemployment (i.e those out of work for over six months) has also come down. By end 2012 the long term unemployed represented 39.1% of the total jobless; the first sub-40% ready for three years. Market participants don’t expect unemployment to reach 5.5% before 2016.
The US economy expanded by an annualised 3.1% in Q3-12. However, much of the growth came from one-off contributions such as an increase in business inventories; usually a sign of sluggish demand as inventories pile up. Longer-term, the housing market has driven growth for the last six quarters as the sector continues to recover.
Market participants expect GDP to grow by a meagre annualised 1.3% in Q4-12. In particular, the uncertainty over the “fiscal cliff” weighed on consumer confidence during the final months of 2012. The consensus forecast is for GDP to expand by an annualised 1.7% in Q1-13 as concerns over budget policy weigh on sentiment. However, overall, Morningstar expects the economy to strengthen throughout the year.
Canada, which represents 8% of the index’s value, generated jobs for the last five months of 2012 despite sluggish economic growth. Canada added 41,200 new full-time positions in December as unemployment dropped to 7.1%, the lowest level since December 2008. The latest job growth was primarily driven by the construction sector despite housing starts slowing by 1.7% in November. However, Morningstar doubts that job growth will continue without a sustained economic expansion. Given the slow growth and low inflation environment, Morningstar does not expect that the Bank of Canada to increase interest rates anytime soon.
Indexkonstruktion
The MSCI North America Index tracks the performance of North American equities. The index is a free-float market capitalisation weighted index representing 10 sectors across the US and Canada. Component stocks have to fulfil MSCI’s size, liquidity and free float criteria to be included in the index. MSCI uses the official exchange closing prices to calculate the index’s value. The index is reviewed on a semi-annual basis with minor quarterly reviews to ensure that it accurately reflects the evolving marketplace. As of writing, the index is heavily biased towards the US (around 90% of the index’s value) with the remainder invested in Canadian equities. On a sector level, the index favours IT (17%), followed by financials (17%) and energy (12%). The biggest single issuer exposure is Apple, representing 3% of the index.
Fondskonstruktion
The iShares MSCI North America uses optimised physical sampling techniques to track its reference index. The fund intends to invest in only a portion of the constituents of the MSCI North America Index which represent the benchmark’s risk-return characteristics as closely as possible. iShares may engage in securities lending within this fund to generate additional revenues for the fund. The lending revenues generated from this activity are split 60/40 between the fund and the lending agent BlackRock, whereby BlackRock covers the costs involved. To protect the fund from a borrower’s default, BlackRock takes collateral greater than the loan value. Collateral levels vary from 102.5% to 112% of the value of securities on loan, depending on the assets provided by the borrower as collateral. Additional counterparty risk mitigation measures include borrower default indemnification. Specifically, BlackRock commits to replace the securities that a borrower would fail to return. The indemnification arrangement is subject to changes, and in some cases without notice. Finally, BackRock limits the amount of assets that can be lent out by this ETF at 50%.Cash received as dividends from the underlying stocks is held in the fund’s income account until it is distributed to fund holders. Distributions are made on a quarterly basis. This dividend treatment can potentially create a drag on returns in upward trending markets as dividends are not reinvested into the fund. In practice this cuts both ways. It could also result in outperformance if the benchmark falls in the interim period.
Gebühren
The fund levies a total expense ratio (TER) of 0.40%, which is in the middle of the range for ETFs tracking the NASDAQ 100. Other potential costs associated with holding this fund which are not included in the TER include rebalancing costs, bid-ask spreads and brokerage fees.
Alternativen
As of writing, there are many ETFs providing equity exposure to the North American region, in particular the US. However, only ComStage offers an ETF tracking the same reference index. The ComStage ETF uses synthetic replication and levies a total expense ratio of 0.25%.
As the US represents about 90% of the value of the MSCI North America Index, investors might also consider an ETF tracking a pure US index. Despite an almost perfect correlation of the MSCI North America with the S&P 500 Index over 3, 5 and 10 years, the S&P 500 Index offers a slightly better risk/return profile. Over the last three years, the MSCI North America Index returned 9.6% on an accumulated base with a standard deviation of 15.6%. By way of comparison, the S&P 500 Index returned 10.2% with a standard deviation of 15.3% over the same time period. Hence, the iShares MSCI North America ETF is best suited only for investors believing in a potential growth story in the commodity market in Canada, e.g. gold, oil and agricultural products. However, these Canadian companies represent less then 2% of the index’s value.
The largest ETF in terms of total assets under management tracking US equity only is the iShares S&P 500 USD ETF. Like most iShares ETFs, this one also uses physical replication in order to achieve its objective and levies a TER of 0.40%. Alternatively, investors might also consider slightly cheaper options from db X-trackers using synthetic replication. The db x-trackers S&P 500 ETF levies a TER of 0.20% and the db x-trackers MSCI USA TRN ETF charges a TER of 0.30%.
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