April 4, 2011

Fund Focus, ETFs: iShares Launches China Fund; Van Eck Hard Assets ETF Reaches AUM Milestone

In busy week, MFS and Act II Capital also announce product launches

In exchange-traded fund news, BlackRock Inc.’s iShares launched a China index fund while Van Eck Global’s hard assets ETF reached a monetary milestone. Elsewhere in the fund universe, MFS Investment Management made news with the launch of two new total return funds and hedge fund Act II Capital launched a UCITS III version of a popular offshore fund.

On Thursday, BlackRock announced that its iShares Exchange Traded Funds business was launching the iShares MSCI China Index Fund (MCHI) on the NYSE Arca.  The fund is the first China ETF to be benchmarked to the large- and mid-cap Morgan Stanley Capital International, or MSCI, universe, and provides exposure to the top 85% of Chinese equities by market cap.

"The new iShares MSCI China Index Fund provides clients access to one of the fastest growing economies in the world," said Noel Archard, head of U.S. product at iShares at BlackRock, in a statement.  "The fund further complements our single-country product suite, which has seen significant activity over the past few months as investors increasingly look to single country funds to express nuanced views on global markets."

Although BlackRock has claimed the first stake in its MSCI-benchmarked China ETF, ETF Daily News reported that MCHI is actually the 23rd China ETF, “and some of the existing ones provide similar or even broader coverage of the country.”

According to iShares Global Chief Investment Strategist Russ Koesterich in the BlackRock news release, China continues to be one of the fastest growing economies in the world with an estimated growth of 10.3% in 2010 and should continue to offer attractive investment opportunities as it transitions from an export economy to a consumption-based one.  He said that investors can combine MCHI with the iShares MSCI China Small Cap Index Fund (NYSE Arca: ECNS), which began trading in September 2010, to create “comprehensive MSCI China exposure.”

With Thursday’s announcement, iShares, the world's largest manager of ETFs, now offers 40 international single country ETFs. At Dec. 31, 2010, BlackRock's assets under management totaled $3.561 trillion.

Elsewhere in the ETF universe, Van Eck Global announced March 28 that its Market Vectors RVE Hard Assets Producers ETF (NYSE Arca: HAP), a global hard assets exchange-traded fund, has amassed AUM of more than $250 million since its launch in August 2008.

HAP uses the commodity equities Rogers Van Eck Hard Assets Producers Index (RVEI) as its benchmark. The ETF seeks to replicate the RVEI’s price and yield performance before fees and expenses. Well-known international investor Jim Rogers, a co-founder of the Quantum Fund with George Soros, is chairman of the RVEI Committee, and was actively involved in the construction of the index in partnership with S-Network Global Indexes.

HAP bills itself as a “one-stop shopping” ETF for the global hard assets industry because its underlying index covers 328 companies in 40 countries and six sectors as of Dec. 31. The index includes companies that produce and distribute hard assets and related products, including energy, agriculture, base metals, precious metals, forest products, water and renewable solar and wind energy.

In other fund news, MFS Investment Management announced on Wednesday its launch of the MFS Global Multi-Asset Fund (GLMAX) and MFS Absolute Return Fund (MRNAX). The two mutual funds are designed to meet the growing demand from advisors and investors for diversified, lower-volatility, single-fund investments. Both funds’ investment objective is total return.

MFS seeks to achieve GLMAX’s objective by allocating the fund’s assets to a mix of global equities, real estate-related investments, commodity-related investments, and global corporate and government bonds including inflation-adjusted debt instruments.

MRNAX’s investment objective involves an absolute return approach that earns a positive return regardless of market conditions. MFS seeks to achieve the fund’s objective by generating returns from a combination of individual security selection of primarily debt instruments and tactical asset allocation to manage the fund’s exposure to asset classes, markets and currencies.

“In a growing trend for more than a decade, advisors and investors have sought new solutions for a greater level of diversification and risk management within a single fund," said James A. Jessee, president of MFS Fund Distributors Inc., in a statement. "More and more, investors are looking for investment solutions that have the potential to provide attractive risk-adjusted returns in all environments with less volatility than the market."

On Thursday, New York hedge fund Act II Capital launched an onshore version of its Act II Capital Fund. Operated by Luxembourg Financial Group, the Act II Specialist Equities Fund launched as a daily liquidity UCITS III Luxembourg sociedad de inversión de capital variable, or SICAV, with an initial size of $50 million.

The new fund will follow the investment strategy of the Cayman-based Act II Capital Fund and is initially available in U.S. dollar, British pound and euro share classes. Since it launched in 2002, the offshore Cayman fund has delivered annualized returns of 10.4%, Hedgeweek reported.

“We are really excited about being able to offer our award-winning fund in UCITS III form,” said Michael Didier (left), a partner in the Act II Capital SICAV, in a statement. “Our strategy fits perfectly within the UCITS framework and we will have to make no alterations to the way we run our fund.”

The fund, like the Act II Capital fund, will practice a long/short equity strategy focused on in-depth fundamental analysis in sectors including media, leisure, Internet consumer, technology, business services and telecommunications across all capitalizations in primarily U.S.-based companies.

“The fund’s investment universe consists of growth areas in the economy (Internet, Smart Phones, Tablet Computers, Video Games, etc.) that are in the midst of a vast, multi-year secular transformation, which will result in many winners and losers,” according to a Luxembourg Financial Group news release.

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