Credit Suisse Steps Up In Emerging Markets

  1. Credit Suisse announced a major expansion of its equity ETF range today with the launch of 13 new funds on the SIX Swiss Exchange. The new funds are largely based on emerging market equity indices.

    By contrast with its existing range of ETFs, which use physical (or “in specie”) replication, the bank’s new funds are swap-based. In a first for a European ETF issuer, Credit Suisse says it will be publishing the substitute basket for all 13 funds on its website daily. The substitute basket is the portfolio of assets owned by a swap-based ETF as collateral for the swap guaranteeing the index return. Under Europe’s UCITS rules, such collateral has to represent at least 90% of a fund’s net asset value. Such information has typically only been provided half-yearly by swap-based ETF providers in their annual and semi-annual fund reports.

    Credit Suisse’s new equity ETFs include 12 based on MSCI indices, all but one of which track emerging market countries (the other being Australia). The firm is also listing Europe’s first CSI 300 ETF (based on the 300 largest Chinese companies listed on the Shanghai and Shenzhen stock exchanges), although CSI 300 ETFs have been launched in Asia by several providers, including iShares and db x-trackers.

    In the table below we provide the fund name, currency, index type and total expense ratio of the full range of new Credit Suisse ETFs. All the funds are domiciled in Ireland and all reinvest dividend income.

    Fund Name

    Fund Currency

    Index Type

    TER p.a. (%)

    CS ETF (IE) on MSCI EM Asia

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI EM EMEA

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI EM Latin America

    USD

    Net total return

    0.65

    CS ETF (IE) on CSI 300

    USD

    Unknown

    0.50

    CS ETF (IE) on MSCI Korea

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI Taiwan

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI Australia

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI India

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI Russia

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI South Africa

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI Brazil

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI Chile

    USD

    Net total return

    0.65

    CS ETF (IE) on MSCI Mexico Capped

    USD

    Net total return

    0.65

    According to the bank, its newly launched funds “combine the advantages of synthetic replication with the transparency of direct replication.”

    “In the case of more complex country indices such as individual emerging markets, it is often difficult, if not impossible, for investors to gain access to direct investments. Synthetic replication now allows less liquid indices to be replicated accurately and efficiently,” Credit Suisse states on its website.

    The assets in the substitute basket will be chosen “with a view to minimizing costs and maximizing tax considerations, while complying with legal requirements (e.g. UCITS III) at the same time,” the bank says.

    In addition to their Swiss listings, the funds have been registered for sale in the UK and Ireland, and Credit Suisse is expected to cross-list the ETFs on other European exchanges in due course.

    Credit Suisse is given as the sole initial market maker for all the new ETFs. Timber Hill, Morgan Stanley and Unicredit act as market makers for some of the other ETFs in the Credit Suisse range.

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