iShares has launched the iShares EURO STOXX 50 ex-Financials UCITS ETF, Europe’s first exchange-traded fund with an international security structure.
The fund, listed on the London Stock Exchange, will offer investors access to Eurozone equities whilst stripping out financial exposures, for example banks and insurance companies.
Investor appetite for Europe has surged in recent months and this new fund allows investors access to a broad, but potentially less volatile, Eurozone equity exposure. This can often form a core building block in portfolios while supporting investors who choose financials-focused funds, or single stock exposures, to complement their asset allocation.
This fund will be Europe’s first ETF to come to market with an international security structure. The launch is the result of a partnership between BlackRock and Euroclear Bank, first announced in June 2013.
Previously, when an ETF has listed and traded on multiple national exchanges in Europe, it settled in the national central securities depository (CSD) of the exchange where that trade was executed. With an international security structure however, the ETF trade can settle in a single pan-European location making settlement more efficient. This single international settlement venue will greatly improve and simplify the post-trade process, supporting efforts to increase liquidity and reduce costs, ultimately resulting in the growth of the European ETF market.
The iShares EURO STOXX 50 ex-Financials UCITS ETF is a physically replicating fund which invests in blue chip stocks from 12 Eurozone countries, while excluding companies from the financial sector, potentially providing investors with a less volatile exposure to Eurozone equities. The fund has a total expense ratio of 20 basis points.
Tom Fekete, head of product development for iShares EMEA, says: “We are excited to launch this fund using the new international security structure. Eurozone financial stocks are likely to exhibit volatility in 2014 and this ETF provides a building block for investors to express their views, by either side-stepping the sector or specifically targeting it by adding other financials-focused funds or single stocks to their portfolios.”
Stephan Pouyat, global head of international markets, Euroclear, says: “We’re hugely proud of the results of our work with BlackRock this year. The realisation of this new international ETF asset class marks another step in the development and maturation of the European ETF market. Simplifying the issuance process and providing uniform settlement practices regardless of trading venue will make it easier for investors to trade these ETFs. This will ultimately improve liquidity in the market, which should have a positive effect on processing costs for the end investor.”