BlackRock’s exchange-traded funds (ETF) platform iShares has launched a Factor ETF series aimed at investors seeking exposure to global equity markets with distinct views on specific drivers of risk and return. iShares Factor ETFs are an expansion of BlackRock’s Smart Beta platform, targeting sources of return which cannot be isolated through traditional market capitalisation weighted indices.
Each fund provides access to global equity markets and seeks to offer targeted exposure to a specific factor that has historically provided enhanced risk adjusted returns including value, size, quality and momentum. Investors will be able to express factor views throughout the business cycle through these funds which can be used as part of a broad portfolio to diversify portfolio risk or used as niche exposures aiming to boost portfolio performance.
“Our Smart Beta strategies are simply the next step in the 40 year evolution of passive investing at BlackRock,” said Sara Shores, global head of Smart Beta at BlackRock. “Through the iShares Factor ETFs, investors can now access sources of potential additional return in a passively implemented portfolio.”
Shores also said that the new range which complements the firm’s minimum volatility products, can be used to emphasise specific, high conviction investment views or construct a broadly diversified portfolio along factor dimensions “with the goal of outperforming the broad equity market”.
The funds add to iShares’ existing suite of Smart Beta ETFs, which includes a minimum volatility factor range that aims to provide broad, diversified market exposures with reduced volatility. iShares Factor ETFs are based on industry-leading MSCI indices to ensure each follows a rules-based index methodology and provides investors with consistent, transparent and low cost access to a given factor.
Japanese ETFs
The launch follows iShares’ expansion of its currency-hedged fund range last week with the listing of the iShares MSCI Japan USD Hedged UCITS ETF on the London Stock Exchange.
The fund invests in Japanese equities in a way that seeks to protect investors from the impact of fluctuations between the base currency of the fund - US dollar - and the currency denomination of the underlying investments, yen.
It is a physically replicating fund which holds Japanese stocks and uses financial derivative instruments, namely foreign exchange forward contracts, to mitigate currency risk. The ETF is hedged against currency movements on a monthly basis.
“Japan has been attracting new interest in anticipation of positive effects from new reform measures introduced by the Japanese government, but investors are paying closer attention to how they can control currency risk when gaining exposure to this market,” said Tom Fekete, head of product development for iShares in Europe, the Middle East and Africa (EMEA). “Currency hedged ETFs offer efficient and cost-effective exposures to a market in a single transaction.”
This new ETF brings iShares’ suite of equity and fixed income currency-hedged ETFs to 13.
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