Bonds have been the default safe haven move amid the coronavirus outbreak, but now they could become an essential component to help weather the economic storm in the European Union. As part of a stimulus package to blunt the economic effects of the virus, the EU nations are proposing “corona bonds,” which would create debt to help fund the stimulus, but not all support this idea wholeheartedly.
“Germany and the Netherlands are the two most vocal opponents to the idea of so-called ‘corona bonds,’” a CNBC report noted. “Another nine EU nations have said this new debt instrument, which would combine securities from different countries, is needed to mitigate the vast economic impact of the coronavirus pandemic. The German and Dutch opposition has sparked a lot of anger among southern European lawmakers, in nations where the costs of the virus are set to exacerbate hefty debt piles.”
“For Germany and the north, jumping from the virus crisis directly to debt mutualization will simply not work politically,” said Carsten Nickel, from the research firm Teneo.
For the exchange-traded fund (ETF) investor, they may want to keep an eye on Europe-focused funds. Here are three funds to check out:
- Vanguard FTSE Europe Index Fund ETF Shares (VGK ): seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in the major markets of Europe. The fund employs an indexing investment approach by investing all, or substantially all, of its assets in the common stocks included in the FTSE Developed Europe All Cap Index.
- iShares MSCI Eurozone ETF (EZU ): seeks to track the investment results of the MSCI EMU Index composed of large- and mid-capitalization equities from developed market countries that use the euro as their official currency. The index consists of stocks from the following 10 developed market countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal and Spain.
- iShares Core MSCI Europe ETF (IEUR ): seeks to track the investment results of the MSCI Europe IMI. The index is a free float-adjusted market capitalization-weighted index which consists of securities from the following 15 developed market countries or regions: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
An Active European Option
Another fund to look at for actively managed strategies is the Goldman Sachs ActiveBeta Europe Equity ETF (GSEU). The fund seeks to provide investment results that closely correspond to the performance of the Goldman Sachs ActiveBeta® Europe Equity Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index, in depositary receipts representing securities included in its underlying index and in underlying stocks in respect of depositary receipts included in its underlying index. The index is designed to deliver exposure to equity securities of developed markets issuers in Europe.
This article was originally published on ETF Trends.
