Die Erholung der Südländer hat die Rendite von Euroland-Indizes in den vergangenen 24 Monaten beflügelt. Der hohe Anteil an Finanzaktien sollte Investoren hellhörig machen.

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Rolle im Portfolio

The fund offers broad-basket equity exposure to large and mid-cap companies domiciled within the European Monetary Union (EMU).

Due to its broad sector and geographic equity exposure, this ETF can be utilised as a core holding in a diversified portfolio.

The exclusion of non-EMU stocks from the benchmark index – most prominently UK and Swiss stocks - increases its sector concentration compared to broader European indices such as the STOXX Europe 600. More specifically, the MSCI EMU overweights consumer cyclicals, technology, and utilities and underweights consumer defensives and healthcare compared to the STOXX Europe 600. Despite these differences in country and sector exposure, the two indices have maintained nearly perfect positive correlation over the past 10 years (~97%). Over the same timeframe, the MSCI EMU index has also exhibited a high historical correlation (~84%) with the MSCI World index.

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Fundamentale Analyse

Severe market tensions in the summer 2012 forced the ECB President Draghi to announce that the central bank was ready to do “whatever necessary to ensure the survival of the Euro”. Mr Draghi’s verbal intervention has proved credible enough to allow for a significant decrease of tensions across both bond and equity markets.

Against this general backdrop, the ECB maintains a very accommodative monetary policy stance. In June 2014, the ECB cut interest rates to a historically low of 0.15%, and announced the introduction of a stimulation package, which includes cheap long-term loans to eurozone banks to encourage further lending to small and medium sized companies. Further policy accommodation could come in the form of a QE programme focused on the asset backed securities in order to boost inflation levels, which currently droop below target.

As part of its focus on financial stability, the ECB also routinely provides ample liquidity at very favourable terms to the Eurozone banking sector. This, coupled with low lending rates across the developed world and rising investor confidence, has fuelled impressive stock market gains. The MSCI EMU NR Index, for example, has delivered an annualised return of ~11% over the past five years.

Almost a quarter of the reference index exposure comes from the European financial sector. Financials occupy the riskier end of the equity risk/return spectrum, and exhibit high levels of volatility when compared with the broader equity market. Since 1999, the MSCI Europe Financials Net Return Index has exhibited a significantly larger standard deviation (~27%) than its parent the MSCI Europe Net Return Index (~16%). The regulatory shake-up and related restructuring within the banking sector following the crash of 2008 has contributed to the sector’s relatively muted recovery. Financial institutions have been undertaking the painful and costly task of deleveraging and increasing the quality and quantity of their capital holdings in accordance with Basel III, which is currently in its implementation stage. Concurrently, 124 European banks have been working with the ECB and the European Banking Authority (EBA) to conduct asset quality reviews prior to extensive stress tests scheduled to be run from 2014 to 2016. Further regulation, in the form of the European Commission’s proposed financial transaction tax, or changes to trade valuation procedures suggested by the Basel Committee, if implemented, could significantly impact formerly profitable businesses such as proprietary trading. Consequently, the European banking landscape remains deeply uncertain. With so many of the finer details yet to be finalised, the impact of these regulatory measures is yet to be fully understood.

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The MSCI EMU index includes approximately 85% of the free-float adjusted market capitalisation of all publicly-traded companies from European Monetary Union countries. Components must meet minimum criteria for liquidity, foreign ownership, as well as a waiting period for newly-listed stocks. Eligible securities are weighed by free-float adjusted market capitalisation. Because closely held firms will have a smaller share of their aggregate market capitalisation floated on public exchanges, the free-float adjustment serves to ensure that the underlying liquidity of the holdings is superior relative to a pure market capitalisation weighting. The index is reviewed quarterly, with May and November semi-annual reviews tending to be more comprehensive than those undertaken in February and August. As of this writing, there are 238 companies included in the index. French and German equities make up 60-65% of the index by value. The top sector weighting is financial services (~23) followed by industrials (~14%), consumer discretionary (~13%), and consumer staples (~10%). French oil and gas giant Total, pharmaceutical multi-national Sanofi and banking group Banco Santander are the three largest index constituents, each maintaining around 3% of weighting.

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This ETF fully replicates the MSCI EMU Net Return index. It achieves this by holding all index constituents in their prescribed weights. UBS may allow up to 50% of the fund’s assets to be lent out to generate additional revenues for the fund. However over last six months from mid-July 2014, the maximum percentage lent for this fund was ~32%, while the average on-loan level was ~23%. The gross lending revenue generated can partially offset the TER, and is split 60/40 between the ETF and State Street Bank GmbH, who acts as lending agent, respectively. To protect the fund from the counterparty risk that results from this practice, borrowers are requested to post collateral of between 102% and 115% of loan value, depending on the assets provided. Acceptable collateral includes securities issued by G-10 countries (except Japan and Italy) and Austria, Denmark, Finland, Norway and New Zealand, and world equities. State Street also provides borrower default indemnification in the event that a borrower is unable to return the securities. Cash received as dividends from the underlying stocks is held in the fund’s income account until it is distributed to fund holders. This dividend treatment can create a cash drag on returns in upward trending markets but may provide a cushion against losses in downward trending markets. The fund distributes dividends semi-annually, in February and August.

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UBS charges a management fee of 0.40% for this ETF, which is higher than that charged by competitors. It should be remembered that there are additional, investor-specific costs associated with trading the ETF, such as bid/offer spreads and brokerage commissions. There are also rebalancing costs whenever the index changes composition.

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There is currently a plethora of options available to those wishing to invest in broad-basket EMU equity.

The most popular alternative, as measure by assets under management, is the iShares MSCI EMU ETF, which physically replicates the reference index and charges a TER of 0.33%.

Investors seeking a cheaper option may wish to consider the Amundi MSCI EMU UCITS ETF (TER 0.25%). This ETF offers swap-based exposure to the same reference index, but gives investors the choice between accumulating and dividend distributing exposure.

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Über den Autor

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.