iShares, the exchange-traded funds platform of BlackRock, has launched the world’s first physical Japanese equity ETF, which aims to minimise currency risk for UK and sterling investors.
Listed on the London Stock Exchange, the iShares MSCI Japan Monthly GBP Hedged ETF provides exposure to over 300 of the largest Japanese companies, with a particular focus on industrial, consumer discretionary and financial companies.
The fund is physically-backed, investing in individual securities, and is optimised to track the performance of the MSCI Japan 100% Hedged to GBP Net Total Return Index, holding a sub-set of the index’s constituents. The index offers exposure to Japanese stocks and complies with MSCI’s size, liquidity and free float criteria.
Investors in the fund will be protected from the effects of fluctuations in the sterling-yen exchange rate through currency hedging, the process of fixing exchange rates through the use of foreign exchange forward contracts. This minimises the risk of any movement between the fund’s base currency (GBP) and the currency of the underlying securities (JPY), whether adverse or favourable to performance. The fund will be hedged on a monthly basis and, for efficiency and independence, all currency hedging will be outsourced to State Street Bank Europe.
Stephen Cohen, head of the iShares’ EMEA investment strategies and insights team, says: “Investors are increasingly looking to international markets to diversify portfolios and generate returns, but there is a risk that currency rates can move against them. Through this fund, investors can take a new look at Japan, with the knowledge they will receive flexible, cost-efficient and transparent exposure to Japanese equities with in-built protection against currency movements.”