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BGI goes to exotic ETF

Barclays Global Investors has added the i-Shares MSCI Japan fund to its range of exchange-traded funds and will follow this up with three more new additions.

The fund will track the performance of the MSCI Japan index, which consists of companies such as Nissan, Honda and Toyota motor companies, Canon and Sony. The index represents a range of industrial sectors including consumer goods, industrials and healthcare.

As an exchanged traded fund, the i-shares fund differs from conventional tracker funds in that they can be traded like individual shares despite having the diversification of a fund. i-shares are also a low-cost way of gaining exposure to the markets they track and as exchange traded funds, they are free from stamp duty. This means they are often cheaper than conventional tracker funds and can be traded at any time, while conventional tracker funds can trade only when the underlying holdings are repriced.

This exchanged traded fund is listed on the London Stock Exchange and will benefit from the LSE&#39s recently improved trading system. By tracking Japan, it enables investors to gain access to a single market and could be useful in terms of asset allocation and diversification, particularly where an investor wants to get in and out of a market quickly.

However, both the type of fund and the market it is investing in make it more of a specialist addition to a wide portfolio. As it passively tracks an index, events such as the recent earthquake in Japan would have a negative impact and investors would not be able to rely on active management to soften the blow.


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