BlackRock has seeded its first NZ dollar-hedged exchange traded fund (ETF) with $30 million sourced from a single local investor.
Christian Obrist, head of the BlackRock iShares ETF business in Australasia, said the group was in talks with a number of other NZ clients looking for “cost effective” international fixed income exposure.
“There’s definitely lots of interest,” Obrist said.
Launched last week, the NZ dollar-hedged iShares Global Aggregate Bond ETF offers investors access to an underlying portfolio of about 21,000 sovereign and corporate fixed income securities for 15 basis points (bps).
He said the new iShares fund was the cheapest NZ currency hedged global bond ETF on the market. By contrast, the $200 million NZX-owned Smartshares global bond ETF costs 54 bps. However, the Smartshares fund is actively-managed by global bond giant PIMCO while the iShares ETF tracks the Bloomberg Barclays Global Aggregate Bond Index.
Obrist said ETF and passive fund fees were under pressure across the world with the recent zero-fee offer by Fidelity symptomatic of the increasing competition. Fidelity has pulled in over US$1 billion into the zero-fee funds since launch last month, US media report.
“It’s just one-way traffic [on fees],” he said.
The NZ dollar-hedged iShares product feeds into an Ireland-domiciled UCITS (or Undertakings for Collective Investment in Transferable Securities) vehicle listed on a Chi-X European exchange. According to Obrist, the NZ dollar-hedged ETF follows recent structural changes allowing iShares to create the UCITS side-bar funds.
Typically, iShares would need at least US$100 million committed to launch a new fund but the updated structure can lower that threshold, he said.
The NZ dollar-hedged global bond ETF, for instance, benefits from the liquidity and scale of the underlying UCITS fund, which currently has about US$1.3 billion under management after launching last November.
Interestingly, iShares has no immediate plans to launch an Australian dollar-hedged version of the same fund but would if there was enough demand. Across the Tasman, iShares is shifting its US cross-listed ETFs to ASX listings, he said.
Obrist said the manager could roll out other NZ dollar-hedged ETFs from the UCITS range on the back of local demand.
“We’re weighing up what to do next in NZ,” he said.
While he could not supply figures, Obrist said the NZ market was already a “substantial” user of iShares ETFs across institutional clients as well as via stock brokers.
Long-time iShares representative in NZ, Bruce Edgar, continued to be a “key” part of the growth strategy, Obrist said.
“NZ is a very progressive ETF market. Brokers have quickly developed pipelines to trade offshore products,” he said.
It is understood a new bank-owned platform is due to launch this week allowing NZ investors to access US shares and ETFs, including in fractional amounts.
Overall, iShares is the largest ETF provider accounting for about US$1.8 trillion under management – or about 40 per cent of the global market. BlackRock, also the world’s largest funds manager, holds more than US$6.3 trillion in assets across its range of passive and active products.
Meanwhile, investor appetite for home-grown ETFs has also trended up with Smartshares – the only provider of locally listed funds – recently cracking the $3 billion mark.
Also last week, Takapuna-based boutique manager, Pathfinder, released a rescreened update to its long-standing Global Water Fund to target a growing vegan and animal welfare-aware market.
After sifting through the 60-odd stocks in the portfolio for exposure to animal welfare factors – with the help of specialist research house Sustainalytics – Pathfinder cut just one company, Agilent, from the Global Water product.
Pathfinder director, John Berry, said the move – initiated earlier this year – followed demand from many investors looking for an animal-friendly fund option.
“These have included vegans, who are very passionate about cruelty-free investment, but also a much wider audience focused on animal testing and how animals are treated generally,” Berry said in a release.
Last week a survey by new research firm, Mindful Money, found animal cruelty and human rights abuses were the top two factors New Zealanders wanted their KiwiSaver and investment funds to avoid.