Rolle im Portfolio
The UBS MSCI Japan ETF is one of several strong passive offerings in a category in which we feel active managers have failed to demonstrate their worth.
The fund offers broad and representative cap-weighted exposure to Japanese large-cap equities, a market in which active managers have failed to demonstrate their worth. The MSCI Japan Index includes around 325 Japanese companies, including multi-national giants such as Toyota and Sony, and represents around 85% of the total market value.
The fund charges an ongoing charge of 0.35%, a figure that approximates the median fee for exchange-traded funds tracking Japanese equities. Despite not being the cheapest offering in the category, the fund still maintains a considerable cost advantage when compared with active peers.
This advantage, coupled with an underperformance of active managers, has seen the fund outshine its surviving category peers over three, five, and 10 years when ranked on a risk-adjusted basis.
It has been one of the best-performing ETFs tracking the MSCI Japan Index over the past three years. This said, we think that investors would be better served over the long term by considering lower-cost options that track broader indexes such as the iShares Core Japan IMI ETF or the Vanguard FTSE Japan ETF.
We have a favourable view of the Structured Beta & Indexing team at UBS. The team has remained stable and can draw on a wealth of industry experience when managing funds.
Our conviction surrounding this fund is built around the broad and representative market exposure offered, its relatively low fee structure, superior performance versus passive peers, and a belief that active managers struggle to add value within the Japanese large-cap category. For these reasons, this fund has been awarded a Morningstar Analyst Rating of Silver.
Fundamentale Analyse
Japan, the world's third-largest economy, has struggled for the best part of the past three decades against persistent deflationary pressures and a spiralling public debt burden, precipitated by the falling tax revenue associated with an aging population and weak levels of growth.
In late 2012, Prime Minister Shinzo Abe announced the launch of a package of fiscal stimulus, monetary easing, and structural reforms designed to kick-start the country's stagnant economy.
The markets responded very favourably in 2013, with the MSCI Japan (JPY) Index rising 54%. The weak yen has had a particularly dramatic effect on export-oriented firms, like Toyota or Sony, that generate 70% to 80% of their revenue abroad.
The reality, however, is that gross domestic product growth remains meagre and deflationary pressures persist. That's why, in a further attempt to stimulate domestic demand and promote capital investment, the Japanese central bank introduced negative interest rates in early 2016.
Despite its stagnating economy, Japan's industrials sector--one of the largest in the index--is still one of the most advanced and innovative in the world, with the automobile industry being particularly strong. Looking forward, the Trans-Pacific Partnership free-trade agreement should benefit the Japanese economy but will also require major changes in some of the most protected industries. Further steps taken by the government include improving the flexibility and productivity of the labour force, which is hampered by long-term job security, seniority-based wages, limited female participation in the workforce, and company-based labour unions.
Indexkonstruktion
The MSCI Japan Index is designed to measure the performance of the large- and mid-cap segments of the Japanese equity market. With 300-325 constituents, the index covers approximately 85% of the free-float-adjusted market capitalisation in Japan. Components must meet minimum criteria for liquidity, foreign ownership restrictions, and a waiting period for newly listed stocks. The free-float adjustment serves to ensure higher underlying liquidity relative to a pure market capitalisation weighting. The index is well diversified across industries. At the time of writing, the biggest exposures were consumer cyclicals (20%), industrials (20%), and financials (12%). On a company level, Toyota is at the top with a weighting of 5%, followed by Mitsubishi UFJ Financial Group (2%) and Softbank Group (2%); all remaining constituents are below 2%.
Fondskonstruktion
The fund uses full physical replication to replicate the performance of the MSCI Japan Net Total Return Index. This means that the fund holds all the index securities in the same weightings stipulated by the index. The fund uses futures for cash management purposes. This is standard practice and helps limit tracking error. UBS engages in securities lending and may lend up to 50% of its assets to generate revenues and thus help improve the fund's tracking performance. The fund lent out 3.23% on average over the 12 months to the beginning of October 2016 and received net lending returns of 0.02%. The maximum the fund lent out at any given time over the past year was 7.67%. The gross lending revenue generated can partially offset the total expense ratio and is split 60/40 between the ETF and State Street Bank GmbH, which acts as lending agent. This practice introduces counterparty risk, as the party to whom the securities are lent may default, and it is left to investors to decide whether or not the additional income generated through securities lending is an adequate compensation for the risk level entailed. To minimise counterparty risk, UBS restricts securities lending to predefined counterparties, holds collateral in a ring-fenced third-party with State Street Bank, and marks the collateral's value to market daily. UBS and third-party agents, such as Clearstream Banking and Euroclear, manage the securities-lending process, including monitoring collateral values. UBS ETF business is efficiently run by a team of experienced professionals. The company runs a mixed physical/synthetic product lineup with a strong bias to equity market exposures. The fund management process is focused on achieving cost efficiencies, although this does not necessarily lead to lower ongoing charges. UBS has made a big business bet in the areas of currency-hedged ETFs and those with an environmental, social, and governance theme.
Gebühren
The fund charges an ongoing charge of 0.35%, a figure that approximates the median value for MSCI Japan ETFs. The fund maintains a considerable cost advantage when compared with active peers. The annual tracking difference (fund return less index return) for the fund over the trailing three-year period has been 0.39%, suggesting that the total holding cost per year is similar to the ongoing charge. Other potential costs for the investor include bid-ask spreads and brokerage fees when buy and sell orders are placed for the ETF.
Alternativen
Currently, of all the funds tracking the MSCI Japan Index, the HSBC MSCI Japan ETF charges the lowest ongoing charge (0.19%). This has translated into superior tracking difference (fund return – index return) when compared with direct rivals during the trailing five-year period. The UBS MSCI Japan ETF has also posted impressive tracking difference over the same period and remains a strong option.
The iShares Core MSCI Japan IMI ETF and the Vanguard FTSE Japan ETF each offer broader (1,200 and 500 constituents, respectively) exposure to the iShares MSCI Japan ETF for a much lower fee (total expense ratios of 0.20% and 0.19%, respectively).
An increasingly popular alternative way to gain access to the Japanese equity market is the Nikkei 400 Index. It uses qualitative and quantitative scoring to select 400 companies that meet specific quality requirements and have an investor-focused management approach. Currently, Amundi (total expense ratio 0.18%) and Source (total expense ratio 0.20%) offer the cheapest Nikkei 400 products.
The cheapest Japanese equity exposure is offered by the physically replicated db X-trackers Nikkei 225 ETF, which charges a management fee of only 0.09%. Despite the similarities in name, the Nikkei 225 doesn't employ the same "quality filters" as its larger stablemate, the Nikkei 400, instead weighting constituents solely based on their market price.
Finally, the broadest market exposure to Japanese equity is provided by funds tracking the Topix index, which is made up of around 1,900 constituents. The recently launched Amundi Japan Topic ETF currently has the lowest ongoing charge of 0.20%.
