BlackRock expanded its suite of US equity ETFs with a double launch last Friday.
The iShares Russell 2000 Swap UCITS ETF (RU2K) and the iShares Nasdaq 100 Swap UCITS ETF (N100) are listed on the London Stock Exchange with a total expense ratio (TER) of 0.20% apiece.
RU2K, which uses unfunded total return swaps to replicate the performance of the Russell 2000 index, looks to capitalise on the increased demand for small-cap equities since July’s eye-catching rally.
N100, on the other hand, offers synthetic exposure to the large-cap growth segment of the US equity market.
It tracks the Nasdaq 100 index, comprised of 100 of the largest non-financial companies listed on the Nasdaq stock exchange, currently weighted heavily towards the technology sector.
The 2017 HIRE Act enables Irish domiciled synthetic ETFs to circumvent the withholding tax on dividends that physical ETFs are subject to. However, there is additional counterparty risk inherent in the structure.
BlackRock use a multi-swap counterparty model to mitigate this, as well as conservative, pre-defined criteria to ensure the quality of the fund’s collateral.
Brett Pybus (pictured), head of the iShares EMEA investment and product strategy team at BlackRock, said the new funds “offer efficient access and complement our existing US equity line up, providing a diverse range of tools for asset allocation, trading and portfolio management functions.”
The launches come after the firm debuted the iShares MSCI World Swap UCITS ETF (IWDS) in March and follow a strong year for US equities, with the S&P 500, Nasdaq Composite and Russell 2000 benchmarks up 21.2%, 22.8% and 9.9%, respectively, so far in 2024
They take BlackRock's suite of synthetic ETFs to five products, marking a U-turn from when group CEO Larry Fink called out European rivals Lyxor and SocGen at a conference in New York for their use of synthetic ETFs. At the time, BlackRock exclusively offered physical ETFs.
