UBS targets currency worries with listing

UBS Global Asset Management is targeting concerns over currency volatility with the listing of its composite hedged exchange-traded fund on the London Stock Exchange.

UBS targets currency worries with listing

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Effective from 10 January, the UBS ETF CMCI Composite hedged GBP SF UCITS ETF will be available to UK investors in a GBP share class.

The fund aims to capitalise on increased awareness of the hazards posed to investments by fluctuating currency rates while delivering commodities exposure, as Andrew Walsh, UBS’ head of ETF sales for UK and Ireland, explained.

“Currency volatility hit its peak in 2009, and the awareness of currency risk is now a lot more in investors’ minds now,” he said.

“You used to just have to rise and fall with it – the problem was that if an investor saw 20% growth in the equity market but the currency fell 15% at the same time, that investor only made 5%.

“Clients are increasingly concerned about the direction of currency in general, and if you buy a GBP-hedged product you are naturally worried about the dollar falling against sterling. If you are invested in a fund with US dollar-denominated underlyings and the dollar nosedives then you lose out, so you want to be in a GBP-hedged vehicle if the sterling rises against the dollar.

He continued: “People often think that if they are in a fund with a GBP trading line then they are hedged, but that is not the case – it is just the numbers that come through in sterling.

“But nowadays there are a lot more products out there that you can have currency hedging embedded into. So, for example, investors can buy into the eurozone equity story without having to worry about the currency collapsing under their feet.”

But with the low-flying commodities story still ongoing, why promote a product that targets investments in that market?

“Commodities have had a bad run for the past two years,” he conceded. “But more people are now starting to ask about commodities products. There is a sense that prices may have hit bottom. So if you want commodities exposure but are worried about the dollar coming down, the ETF gives you a two-pronged approach.”

The Dublin-domiciled fund was previously available on the LSE in unhedged GBP and US dollar trading lines.

It seeks to replicate the UBS Bloomberg CMCI Composite Total Return GBP-hedged index. It carries a total expense ratio of and performance drag of 1.2%.
 

 

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