Our convictions for 2025 in ETFs!

The clan of bulls:

• Laurent Pignot, senior analyst: favorable to an outperformance of the Canadian index, the TSX Composite, over American indices

Relevant ETF : iShares MSCI Canada UCITS (ISIN : IE00B52SF786)

This ETF provides diversified exposure to 85 Canadian companies, including Royal Bank of Canada (8.1%), Shopify Subordinate Voting (6.1%), Toronto Dominion (4.4%), Enbridge (4.4%) , Brookfield (3.7%), Bank of Montreal (3.4%), Canadian Pacific Kansas (3.2%), Bank of Nova Scotia (3.2%), Canadian Natural Resources (3.1%) and Constellation Software (3%). The best represented sectors are finance (37.5%), energy (17.5%) and industry (11.5%). The fees amount to 0.5% and the outstanding amount exceeds $1 billion.

• Romain Fournier, editor-in-chief Marketscreener.com: positive on the FTSE 100

ETF selected : SPDR FTSE UK All Share UCITS (ISIN : IE00B7452L46)

There are many funds that track the performance of the UK market. This replicates the performance of the market as a whole. Its fees are relatively low (0.2%) and its outstanding assets are around £500 million. Its main positions are those of the FTSE index with AstraZeneca (6.6%), Shell (6.5%), HSBC (6%), Unilever (4.7%), Relx (2.9%), BP (2.7%), British American Tobacco (2.4%), Diageo (2.4%), LSEG (2.4%), GSK (2.3%).

• Odile Dubois, editor: positive about the American pharmaceutical industry

Affected ETF : Invesco Nasdaq Biotech UCITS (ISIN : IE00BQ70R696)

Our editor anticipates an impending wave of transactions and agreements within the pharmaceutical sector. The Invesco Nasdaq Biotech UCITS ETF does not directly track the index supported by Odile Dubois, the S&P Biotechnology Select Industry Index. However, it has many common positions. It invested in Gilead Sciences (8.4%), Amgen (7.8%), Regeneron (7.7%), Vertex (7.4%), AstraZeneca (3.8%, via ADRs), Alnylam ( 3%), Biogen (2.2%), Illumina (2.2%), Argenx (2%, via ADRs) and Moderna (1.6%). In this ETF, we find the majority of exposure to the United States (86.5%) but also to Switzerland (7.7%), Sweden (3.3%) and other countries in addition low proportions.

• Arthur Kuntz, trainee analyst: bullish on the value segment in Europe

Affected ETF : iShares Edge MSCI Europe Value Factor UCITS (ISIN : IE00BQN1K901)

The ETF provides diversified exposure to a selection of stocks that are undervalued relative to their fundamentals in the MSCI Europe. There are 149 positions. Unsurprisingly, we find pharmaceutical industry laboratories Novartis (4%), Sanofi (4%) and GSK (2.2%), automobile manufacturers with Stellantis (2%) and Mercedes-Benz (2%) as well as neglected technology companies with Nokia (1.9%) and Infineon (1.9%). There is also British American Tabacco (4.9%), Siemens (3.3%) and HSBC (2.8%).

• Jordan Dufee, senior analyst, favors the pharmaceutical sector

Affected ETF : Xtrackers MSCI World Health Care UCITS (ISIN : IE00BM67HK77)

The fund is one of the largest on the theme. Its fees are relatively moderate, at 0.25%. It contains 136 components. The large pharmaceutical companies are represented with the champions of weight loss treatments Eli Lilly (8.7%) and Novo Nordisk (3.9%), Johnson & Johnson laboratories (4.8%), AbbVie (4.3%), Merck (3.5%), AstraZeneca (2.8%), Roche (2.7%) and Abbott Laboratories (2.7%), the health insurer UnitedHealth (6.5%) as well as Thermo Fisher (2 .7%).

• Esteban Tesson, journalist, bullish on the Nikkei 225

Affected ETF : iShares Nikkei 225 UCITS (ISIN : IE00B52MJD48)

Sometimes the simple things are the best. No need to look far with this ETF which replicates the performance of the flagship Tokyo index. The main weighting is Fast Retailing (11.9%). Other companies are well represented: Advantest (6%), Tokyo Electron (5.9%), Softbank (4.5%), Recruit (2.7%), TDK (2.5%), KDDI (2 .5%), Shin Etsu Chemical (2.2%), Terumo (2%) and Chugai Pharmaceutical (1.7%). Fees are moderate (0.48%).

• Grégoire Legrand, bullish on the Argentinian Merval index

Affected ETF : Amundi MSCI EM Latin America UCITS (ISIN : LU1681045024)

In Europe, there is no marketed ETF that replicates the performance of Argentine stocks only. The Amundi MSCI EM Latin America UCITS ETF offers diversification across mid and large capitalizations in emerging Latin American countries. The exhibition is oriented towards Brazil (61.3%), Mexico (26.6%), Chile (6.2%), Peru (4.4%) and Colombia (1.5%) . Ten companies represent 40% of the outstanding amount: Nu Holdings (6.5%), Vale (5.8%), Petrobras (5.1%), Grupo Financiero Banorte (3.3%), Femsa (3%) , Grupo México (2.9%), Weg (2.8%) and Walmart de Mexico (2.7%). Management fees are low, at 0.2%, but the outstanding amount is low (€195 million). It is above all a diversification product which allows you to have a touch on the South American economy.

The clan of bears:

Let’s start with a clarification: investing in ETFs to play the fall of an index or a theme involves investing in inverse or leveraged ETFs. This strategy may involve additional risks compared to traditional ETF investment. This is particularly related to beta slippage. Concretely, this is the consequence of the adjustment of a financial product in relation to the asset whose variations it replicates on a daily basis. The adjustment applies to daily variations: that’s the problem. Let’s take an example to make things clearer:

• Suppose that on day 1, an index starts with a value of €1,000 and a leveraged ETF, which seeks to double the return of the index, also starts at €1,000. If the index falls by 100 points on day 1, it suffers a loss of 10% and its resulting value is €900. Assuming it hits its stated target, the leveraged ETF would therefore fall by 20% that day and have a final value of €800.
• On day 2, the index increases by 10%. Its value therefore increases to €990. For the ETF, its value for day 2 would increase by 20%, meaning the ETF would be worth €960.
• Over the two days, the leveraged ETF did exactly what it was supposed to do: It generated daily returns that were twice those of the daily index.
• But let’s look at the results over the two-day period: the index lost 1% (it fell from €1,000 to €990) while the 2x leveraged ETF lost 4% (it fell from 1 000 € to 960 €). This means that over the two-day period, the ETF’s negative returns were 4 times the index’s two-day return instead of 2 times the return.

• Emilie Servoz, editor, negative on the Russell 2000

Affected ETF : Amundi MSCI USA Daily (-1x) Inverse UCITS (LU1327051279)

There is no short Russell 2000 ETF marketed in Europe. However, Amundi MSCI USA Daily (-1x) Inverse UCITS offers broad exposure with 589 positions. But be careful, the outstanding amount is very low ($45 million) and the management fees are high (0.6%). Liquidity may thus be reduced.

• Adrien Chavanne (myself), junior analyst, bearish on the DAX

Affected ETF : Amundi ShortDAX daily (-1x) Inverse UCITS (ISIN : LU2572257041)

It is once again towards a small ETF (€60 million in assets) that we will have to turn to take advantage of the fall in the German index. Amundi ShortDAX Daily (-1x) Inverse UCITS ETF replicates the inverse of the variation of the 40 stocks with exposure to SAP (15%), Siemens (10%), Allianz (8.1%), Deutsche Telekom (7.3 %), Airbus (6.5%), Munich RE (4.6%), Adidas (3%), Deutsche Boerse (3%), Infineon (2.9%) and BASF (2.7%).

Indices : Nos convictions pour 2025 !