Nomura, a Japan-based global investment firm, has announced the launch of two new currency-hedged exchange-traded funds on the London Stock Exchange, the Nomura JPX-Nikkei 400 Daily EUR-Hedged UCITS ETF (NXJE LN) and the Nomura JPX-Nikkei 400 Daily USD-Hedged UCITS ETF (NXJU LN).
Both funds track the JPX-Nikkei 400 Total Return Index, while mitigating the risk of a depreciation of the Japanese yen against the euro and US dollar, respectively.
Nomura’s recently launched ETFs offer smart-beta exposure to efficient firms with investor-focused management.
Mike Ward, Head of Equity Sales, EMEA, at Nomura, said: “These new ETFs provide best-in-class access to Japanese equities for our international clients, while allowing them to hedge currency risk. They are a direct response to the broad-based interest in Japanese equities among the international investor community.”
The JPX-Nikkei 400 Index is a relatively new innovation having launched in January 2014. It employs a smart beta approach to selecting constituents by including only those firms that meet specific requirements of the efficient use of capital and investor-focused management perspectives. Each firm is rated with both a quantitative and qualitative score.
The quantitative score is an aggregation of the firm’s average three-year return-on-equity, three-year cumulative operating profit, and market capitalisation. The qualitative score is derived from factors such as whether the firm has appointed independent outside directors, whether the firm adopts IFRS accounting standards, and the quality of disclosed earnings information.
The potential constituents are ranked in descending order according to their total scores and the index is composed of the 400 top-ranked names, weighted according to their free-float market capitalisation with a cap of 1.5%. The index is reviewed annually on the last business day in August.
Using back-tested analysis, the index has outperformed the broader and more well-known TOPIX Index since September 2006. It has a bias towards large-cap firms but has reduced exposure to the transportation equipment and banking sectors relative to the TOPIX due to the cap of 1.5% on constituents.
The new ETFs are part of Nomura’s Next Funds range which has accumulated over $50bn in assets under management globally. Next Funds is a new name in the European ETF market, with the brand debuting in January with the launch of the Nomura Nikkei 225 Euro-Hedged UCITS ETF (NXKE LN) and the Nomura Nikkei 225 US-Dollar-Hedged UCITS ETF (NXKU LN), which provide currency-hedged exposure to the Nikkei 225 Index, the most widely-quoted Japanese equity index.
The funds have expense ratios of 0.30% each.