Morningstar
RecommendedMorningstar AwardsWhats New IconETFs Whats New IconIncome Week Whats New IconThematic Investing Whats New IconSign Up to Our Newsletters Open Window Icon
Equity Research & Insights

Oil and Volatility ETFs Perform Best

ETF Times: Fear for potential oil supply disruptions boosted oil and volatility trackers, while Turkish equities took a hit amid concerns that higher commodity prices will fuel inflation

Morningstar ETF Analysts 1 March, 2011 | 4:55PM
Facebook Twitter LinkedIn
Font-Size

New Listings: February 21 - 25
iShares listed six equity ETFs on the Deutsche Börse. Three of the funds track the performance of euro-hedged indices, in this case hedging against exchange rate fluctuations between the euro and the US dollar. The three indices are the MSCI Japan, MSCI World and S&P 500, and the corresponding funds charge total expense ratio's (TERs) of 0.64%, 0.55%, and 0.45%, respectively. These funds complement the existing non-hedged MSCI Japan, MSCI World and S&P 500 ETFs that iShares offers. The three remaining funds offer exposure to Russian, Indian and U.S. equity markets. The iShares MSCI Russia Capped Swap tracks the performance of a capped version of the standard MSCI Russia Index, where no component can exceed 35% of the index's total value. It has a TER of 0.74%. The iShares S&P CNX Nifty India Swap tracks the performance of the S&P CNX Nifty TR Index, which is comprised of 50 equities that represent more than half of the market capitalisation of the National Stock Exchange of India. Its TER is 0.85%. The iShares MSCI USA tracks the performance of the MSCI USA Index and has a TER of 0.40%. The ETFs tracking the Russian and Indian benchmarks were the first iShares ETFs launched as part of the firm's new swap-based platform which debuted last September. Swap-based replication can have the advantage of reducing tracking error when tracking emerging market benchmarks which can include relatively illiquid shares.

HSBC launched an ETF tracking Canadian equities on the London Stock Exchange. The physically-replicated fund tracks the performance of the MSCI Canada Index, which includes about 100 constituent companies. It trades in both pounds sterling (LSE ticket symbol: HCAN) and US dollars (HCAD), and HSBC plans to cross-list the fund on other exchanges in the future. The London Stock Exchange currently offers three other ETFs which track the performance of Canadian equities, from iShares (SCAN), Lyxor (LCAN) and db x-trackers (XCAN). With a TER of 0.35%, HSBC's product is tied with the db x-trackers fund for the lowest fee, but it is important to keep in mind liquidity and other holding costs when assessing the total cost of ownership for these similar products. While Canada is a developed market, its abundant natural resource base--reflected in the fact that the energy and materials sectors account for about one half of the MSCI Canada index’s value--exposes the country's equity market to the prospects of global commodities. This makes the MSCI Canada a potential proxy for growth in emerging markets as countries like China have been voraciously consuming commodities to fuel their capital investment driven economic growth.

Best and Worst Performers for the Week of February 21 - 25
Products linked to two assets, oil and volatility, dominated the list of top performers for the week. The prices of oil and related products climbed as market participants feared potential supply disruptions due to the turmoil in Libya. As the overall equity markets declined, volatility-linked ETFs did well as they usually exhibit negative correlation with equities.

ETFs tracking the performance of Turkish equities were among the worst performers for the week. The Turkish stock market declined to its lowest level in more than five months, partly based on concerns that higher oil prices could cause inflation and ultimately lead to higher interest rates in the country. Palladium prices also saw steep declines this week on the back of higher oil prices as the metal is predominantly used in automobile engines.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn
Font-Size

About Author

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures

The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn't. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here

Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. The Quantitative Fair Value Estimate is based on a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies which includes a financial forecast of the company. The Quantitative Fair Value Estimate is calculated daily. It is a projection/opinion and not a statement of fact. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Quantiative Fair Value Estimate, please visit here

The Morningstar Medalist Rating is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time. Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an analyst’s qualitative assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about these ratings, including their methodology, please go to here

The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate.

For information on the historical Morningstar Medalist Rating for any managed investment Morningstar covers, please contact your local Morningstar office.

For more detailed information about conflicts of interest, including EU MAR disclosures, please see the “Morningstar Medalist Rating Analyst Conflict of Interest & Other Disclosures for EMEA”here

Select Your Site Edition To make sure the site is relevant to you, we need to know if you’re an individual investor or a financial professional.