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Cyclical approach for iShares

iShares has introduced the fourth and last of its new range of funds with the creation of the iBloomberg European cyclicals fund.

The fund will track the iBloomberg European investible cyclicals index and is an exchange traded fund that is designed for experienced investors looking for growth.

The index includes companies that are involved in areas such as car manufacture, car parts, food, clothing, retail, furniture, air travel, leisure and hotels. Some of the companies listed on the index include Boots, British Airways, Gucci, Great Universal Stores, Fiat, Volvo, Lufthansa, P&O, Peugeot Citroen and Electrolux.

The concept behind the index is that these are all companies that are affected by cycles in the European and UK economies. When there is a boom economy, they benefit, but when there is a recession they can be vulnerable. They are also affected by changes in consumer spending.

Although the introduction of the fund rounds off the iShares products that cover the different areas of the market, its timing could prove to be a problem. During a bear market, which is what may be approaching, these companies will be among the first hit by any downturn. However, some of the companies involved, such as Gucci and British Airways are quite strong and may ride out any ill effects from a recession. The index will also do well from any recovery in the market.

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