UBS launches currency-hedged MSCI Europe ETF on LSE

Jul 4th, 2017 | By | Category: Equities

UBS has launched the UBS MSCI Europe UCITS hedged GBP ETF (UBEU) on the London Stock Exchange, providing exposure to approximately 85% of the market capitalization across 15 developed markets in Europe while hedging currency risk relative to the British pound.

Andrew Walsh, head of passive and ETF specialist sales UK & Ireland

Andrew Walsh, head of passive and ETF specialist sales UK & Ireland.

The move follows the firm’s recent unveiling of a euro-hedged version of the ETF on Deutsche Börse’s Xetra and Frankfurt exchanges.

Andrew Walsh, head of passive and ETF specialist sales UK & Ireland, said: “This new listing further complements our existing currency hedged ETF offering.  Investors are increasingly keen to participate in foreign denominated investments but want to limit exposure to potential currency fluctuations. Going forward, we expect to see continued interest from our clients for products with embedded currency hedging.”

The underlying MSCI Europe Index represents the performance of large and mid-cap equities across 15 developed countries in Europe including Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. It covers approximately 85% of the free float-adjusted market capitalization in each country.

As of the end of May, the UK (28%) represents the largest country exposure followed by France (16%), Switzerland (14%) and Germany (15%).

European equities are enjoying a strong bull run in 2017 with the index gaining 20.8% between 1 December 2016 and 26 June 2017.

The largest sector weights of the index are financials (20.3%), consumer staples (14.3%), industrials (13.3%), healthcare (13.2%) and consumer discretionary (10.7%). There are over 400 constituents in the index of which the largest is Nestle with a 3.0% weight.

The ETF utilises a monthly currency hedge, minimizing the exchange rate risk between various non-sterling currency exposures within the portfolio (including the Swedish krona, Swiss franc, Norwegian krone, Danish krone and the euro) and sterling.

The ETF’s total expense ratio (TER) is 0.30%.

UBS also offers the UBS MSCI Europe UCITS ETF (LON: UB12) which provides unhedged exposure to the MSCI Europe Index. It is listed on Borsa Italiana, Deutsche Börse, Euronext Amsterdam and SIX Swiss Exchange, where it trades in euros, or on London Stock Exchange where it trades in British pounds. The fund has €270m in AUM and a TER of 0.20%.

There are a number of existing ETFs, listed on the London Stock Exchange, which offer exposure to the MSCI Europe Index, from providers iShares, Deutsche Asset Management, Lyxor and Amundi. The largest, with £4.9 billion in AUM is the iShares MSCI Europe UCITS ETF (IMEU). It trades in US dollars and British pounds and comes with a TER of 0.35%.

The cheapest is the Amundi MSCI Europe UCITS ETF (CEUR) which trades in British pounds and has a TER of just 0.15%. It has a little over £1bn in AUM.

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