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Theresa May Spends 1B Pounds to Keep Majority: ETFs in Focus

UK's premier, Theresa May, had called for a snap election earlier this month. The unexpected results put her on the quest to strike a deal with minority governments to obtain a majority in the House of Commons.

Prime minister May reached a deal with the Democratic Unionist Party (DUP) to keep her majority in the House. The terms of the deal have received nationwide backlash and has been called 'shabby' by opposing parties (read: Is the ECJ Ruling Good News for British ETFs? ).

The agreement involves a 1 billion pound funding over the next two years for Northern Ireland in order to boost healthcare, education and infrastructure spending in the region. In return, DUP's 10 MPs will help May's Conservatives in the House of Commons in key votes. Multiple politicians and media outlets have called the 1 billion pounds involved in the deal an outright bribe to keep May's premiership (read: One Year Since Brexit Referendum: ETFs in Focus ).

Though May believes that the deal is beneficial for the 'whole of United Kingdom', politicians of other regions including Scotland, Wales and some parts of England expressed their disagreement regarding the same. Labour first Minister of Wales, Carwyn Jones and leader of the Scottish National Party, Nicola Sturgeon expressed concerns over unfair distribution of public funds to countries.

Adding to the agony, May had to change certain parts of her manifesto, which were not in line with DUP's values, including the pension triple lock and means testing the winter fuel payment.

Let us now discuss a few ETFs focused on providing exposure to the UK (see all European Equity ETFs here ).

iShares Currency Hedged MSCI United Kingdom ETFHEWU

For investors looking to gain exposure to the British markets in particular, this fund is one of the most popular pure play options available. It seeks to maintain equity exposure to its un-hedged version EWU, while hedging away the currency fluctuations between the dollar and the British pound.

The fund has AUM of $25.49 million and charges 49 basis points in fees per year. Financials, Consumer Staples and Energy are the top three sectors of this fund with 21.27%, 17.80% and 13.52% allocation, respectively (as of June 23, 2017). The top three holdings for EWU are HSBC Holdings PLC, British American Tobacco PLC and Royal Dutch Shell PLC, with 7.09%, 5.36% and 4.80% allocation, respectively (as of June 23, 2017). It has returned 7.20% year to date and 23.61% in the last one year (as of June 26, 2017). HEWU currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

WisdomTree United Kingdom Hedged Equity FundDXPS

This fund seeks to provide exposure to U.K. dividend paying companies with an export tilt, while also hedging the currency risk.

The fund has AUM of $15.83 million and charges 48 basis points in fees per year. Consumer Staples, Energy and Financials are the top three sectors of this fund with 18.53%, 14.70% and 14.28 % allocation, respectively (as of June 26, 2017). The top three holdings for the fund are Vodafone Group PLC, British American Tobacco PLC and AstraZeneca PLC with 5.09%, 5% and 4.97% allocation, respectively (as of June 26, 2017). It has returned 7.93% year to date and 24.69% in the last one year (as of June 26, 2017). DXPS currently has a Zacks ETF Rank #3 with a Medium risk outlook.

Deutsche X-trackers MSCI United Kingdom Hedged Equity ETFDBUK

This fund seeks to provide exposure to U.K. equities while also hedging the currency risk.

The fund has AUM of $5.38 million and charges 45 basis points in fees per year. Financials, Consumer Staples and Energy are the top three sectors of this fund with 21%, 18 % and 14% allocation, respectively. The top three holdings for the fund are HSBC Holdings PLC, British American Tobacco PLC and Royal Dutch Shell PLC, with 7.15%, 5.41% and 4.84% allocation, respectively (as of June 23, 2017). It returned 7.12% year to date but lost 0.51% in the last one year (as of June 26, 2017). DBUK currently has a Zacks ETF Rank #3 with a Medium risk outlook.

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DEUTS-XT MS UK (DBUK): ETF Research Reports

ISHARS-CHM UK (HEWU): ETF Research Reports

WISDMTR-UK HEQ (DXPS): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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