UBS Asset Management has listed eight alternative beta ETFs with built-in currency-hedging on the London Stock Exchange providing investors with exposure to systematic factor strategies and the ability to hedge currency risk in British pounds.
These GBP-hedged funds add to the existing suite of alternative beta ETFs listed by UBS Asset Management in September 2015.
The products, which were developed jointly with index provider MSCI, are based on the concept of factor premiums, which has been developed by academics over several decades. This investment approach is based on the realisation that certain market factors systematically contribute to excess returns vs. standard market cap weighted indices.
Currency fluctuations can have a major impact on investment returns with more proactive global monetary policy exacerbating currency volatility in recent years. From September 2010 to September 2015 a French or German investor in the MSCI European Monetary Union ('EMU') index would have enjoyed an annual return of +6.38 per cent while an unhedged GBP investor in that index would have seen annual returns of just +3.45 per cent. Had the MSCI EMU GBP hedged exposure been chosen, the annual return for the UK investor would have been almost identical to the 6.38 per cent experienced by the local European investor.
Andrew Walsh, Head of UBS ETF sales UK & Ireland, says: “It is becoming increasingly evident that ‘Alternative Beta’ or ‘Factor Investing’ is a category that is growing in interest for clients and will increasingly be considered a core part of portfolios. With our experience and success in building and delivering currency-hedged solutions, expanding our suite of Alternative Beta ETFs to include embedded currency hedging was a logical next step. Our investors here in the UK will now be able to access specific targeted factor risk-premia in the US and Eurozone equity markets whilst managing currency risk.”