iShares has introduced the iBloomberg European industrials fund.
Created as an exchange-traded fund, it is aimed at experienced investors. The aim of the fund is to provide long-term growth by tracking the recently created Bloomberg European investible industrials index. The fund will be managed by Barclays Global Investors.
The Bloomberg European investible industrials index includes companies that are involved in the electronics, transport, engineering, construction, aerospace, defence, building materials and packaging industries. These companies include BAA, British Aerospace Systems, Deutsche Post, European Aeronautic Defence, Norsk Hydro, Rolls Royce and Siemens, all blue chip companies and therefore considered to be a good risk for investors.
Exchange-traded funds are extremely popular in the US and investment I them now totals more than $80bn. One of their biggest advantages over ordinary tracker unit trusts or Oeics is that they can be purchased almost at once when the index is at an attractive level. Other tracker products can have a delay of hours or even days until the purchase is completed, during which the index could potentially fall. But this can also allow people to buy exchange traded funds when the index is at a low level before it rises. However, one of the drawbacks to exchange traded funds is that they are new to many UK investors.
Looking at three of the exchange traded funds from iShares which have been in existence for at least six months from February 15, 2001 to July 20, 2001, the iFTSE 100 fund has fallen by 3.2 per cent, the iFTSE ExUK fund has fallen by 18 per cent, and the iFTSE TMT fund has fallen by 35 per cent.
During times of stockmarket volatility an index tracker fund will follow the index down as well as up. A more suitable investment for many people might be an actively managed fund. But investors may pay more in charges.