Amundi’s latest ETF ditches European financials

Jan 30th, 2013 | By | Category: Equities

Amundi, one of Europe’s leading providers of exchange-traded funds, has a launched a new ETF designed to offer broad access to European equities but without exposure to financial companies.

Amundi's latest ETF ditches European financials

HSBC is the largest absentee in Amundi’s ex-financials ETF.

Listed on the NYSE Euronext Paris, the Amundi ETF MSCI Europe Ex Financials (EUXF) tracks the MSCI Europe Ex Financials Index, an index which specifically excludes banks, insurers, real estate and diversified financial companies.

The fund is clearly aimed at investors who are fearful of Europe’s financial sector, particularly the region’s banks, which continue to suffer the effects of the eurozone sovereign debt crisis. The fund could also be of use to investors with an already-large existing exposure to financials, either in their portfolio or perhaps indirectly by virtue of employment at a bank.

That said, some industry participants have become more confident on the financials sector and a number of banks have delivered a strong performance over the past few months, outperforming broad indices. Indeed the MSCI Europe Financials Index has posted a return of 8.76% so far this year, compared to the overall MSCI Europe Index (which includes the strong performing financials) which has only managed 6.15%.

By stripping out the financials sector, which equates to approximately 20.5% of the MSCI Europe, the fund loses names such as HSBC, Banco Santander, Allianz, Standard Chartered, UBS, BNP Paribas, BBVA, Barclays, Deutsche Bank and Zurich Financial Services. In terms of top ten holdings, however, only HSBC drops off the list, with the largest holdings remaining largely intact, namely Nestle, Novartis, Roche, BP, Royal Dutch Shell, Voadafone, Sanofi, Total, GlaxoSmithKline. British American Tobacco sneaks into the tenth spot following HSBC’s eviction.

Compared to conventional MSCI Europe ETFs, the fund is likely to be less volatile as the volatility of the financials sector has averaged 31.2% over the past three years compared to Europe as a whole which has averaged 22.5%, though going forward this may be less noticeable as the sector calms. The valuation of the fund (based on price/earnings ratio) will remain broadly the same, but the dividend yield will decline fractionally.

Commenting on the launch, Valerie Baudson, head of Amundi ETF, said the ETF was unique and fitted with firm’s commitment to provide investors with a wide range of investment solutions to manage their asset allocation according to their market views.

The fund is synthetically replicated and has an annual total expense ratio (TER) of 0.30%.

The fund will likely compete against the direct replication db x-trackers EURO STOXX 50 Ex-Financials UCITS ETF (XD5F) which launched late last year becoming one of Deutsche Bank’s first physically backed ETFs. This fund tracks large-cap core eurozone companies excluding financials and comes with a TER of 0.20%.

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