Lyxor, one of Europe’s leading providers of exchange-traded funds, has introduced two new currency-hedged share classes for its highly successful JPX-Nikkei 400 ETF.
Lyxor has rolled out GBP and USD currency-hedged versions of its popular JPX-Nikkei 400 ETF.
Primarily aimed at US dollar and pound sterling-based investors, the new share classes, Lyxor UCITS ETF JPX-Nikkei 400 Daily Hedged C-USD (JPX) and Lyxor UCITS ETF JPX-Nikkei 400 Daily Hedged C-GBP (JPXX), provide daily USD- and GBP-hedged exposure, respectively, to the JPX-Nikkei 400 index.
Listed on the London Stock Exchange, the additional share classes follow the previous launch, on 2nd February 2015, of a EUR-hedged share class on Euronext Paris.
Lyxor was one of the first ETF providers to offer access to the JPX-Nikkei 400 via an ETF, with the fund pulling in more than EUR 300 million in assets since its launch in September 2014.
Demand for the fund has been driven in part by the increased appetite for Japanese equities, largely a consequence of “Abenomics” (the name given to the suite of economic policies, advocated by Japanese prime minister Shinzo Abe since his December 2012 election, designed to revive the sluggish economy with “three arrows”: a massive fiscal stimulus, more aggressive monetary easing from the Bank of Japan, and structural reforms to boost Japan’s competitiveness), but also by the specific appeal of the JPX-Nikkei 400 index.
Launched in 2013, the JPX-Nikkei 400 is increasingly considered the reference benchmark for the Japanese equity market, selecting stocks mainly according to their returns on equity (ROE) and operating earnings, and favouring companies that have adopted superior standards of governance and transparency.
Chanchal Samadder, Head of UK Sales, Lyxor ETF, said: “We think the JPX-Nikkei 400 index is interesting because it’s the first core index we’ve seen that’s not a traditional market cap-weighted or price-weighted index, like the Nikkei 225 or the Topix. It’s moving into the world of fundamental indexing, so that’s why we think it’s a really interesting concept.”
He added: “The JPX-Nikkei 400 is restoring confidence in Japanese businesses, as by construction the index motivates companies to modify their corporate behaviour to be eligible to be amongst the 400 components. Historically, Japanese companies have not been seen as good at returning value to shareholders. Now this new index, by its very construction, encourages Japanese companies to be or aim to be more profitable by improving ROE. We have heard quite a few times now that effectively not being in this index is seen as quite shameful.”
On Abenomics, Samadder notes that while it has had a dramatic positive effect on Japanese equities and drawn investors back to the fold after a long period where Japanese equities were very under owned, the impact of the various economic policies on foreign exchange markets, and indeed currency volatility in general, needs to be fully appreciated.
According to Samadder: “The other consequence of Abenomics has been the depreciation of the yen versus virtually all major currencies [thereby partially offsetting the positive impact of stellar equity market returns for foreign investors], which has led to very strong demand for currency-hedged versions of the index and the launch of the new share classes. Furthermore, with the increased volatility in many currencies over the last 18 months (INR, BRL, RUB, CHF, EUR, JPY) and expected divergent monetary policy between the rest of the world and the US and UK, we are hearing from clients the need for currency hedges to USD and GBP in other equity indices. With the recent quantitative easing announcement by the ECB we also launched GBP and USD share classes on our Euro Stoxx 50 ETF.”
Lyxor’s GBP- and USD-hedged share classes on its Euro Stoxx 50 ETF, the Lyxor UCITS ETF Euro Stoxx 50 Monthly Hedged C-GBP (MSEX) and Lyxor UCITS ETF Euro Stoxx 50 Monthly Hedged C-USD (MSEU), went live on the LSE earlier this month. They have total expense ratios (TER) of 0.20% per annum.
The new currency-hedged share classes on the JPX-Nikkei 400 have TERs of 0.25% per annum.
As of 31st December 2014, Lyxor ranked third in Europe, in terms of assets under management, with more than USD 46.5 billion of ETF assets.