ETF INSIDE-OUT MSCI WORLD INDEX. June 2014

Transcription

1 ETF INSIDE-OUT MSCI WORLD INDEX June 2014

2 A B O U T K O R I S I N T E R N A T I O N A L Koris International is a financial investment advisory firm fully focused on designing and developing dynamic asset allocation models. The company operates with a team of 14 professionals coming from the asset management industry and academia and benefits from the latest advances in financial engineering and a long proven knowhow. Located in Sophia-Antipolis on the French Riviera and in London, Koris International is wholly owned by its founders and has been operating for more than 10 years with the main European actors of the asset management sector through an Advisory model well adapted to the asset allocation business. Koris International offers solutions that meet the needs of asset management companies, private banks and institutional investors throughout Europe. These advanced quantitative techniques are designed to satisfy the investors appetite for a better risk control. Koris International develops portfolio solutions for multi-management implemented with index funds, Futures, Total Return Swaps, active funds as well as liquid alternative investment strategies through managed accounts. info@koris-intl.com D I S C L A I M E R Data and information provided in this document are for information purposes only. Koris International has strived to ensure information provided is as reliable and accurate as possible. Under no circumstances could the company be held accountable for potential error or omission. Information reported and calculations have been made on the sole basis of publicly available information. Time series and information on financial instruments have been sourced independently and, whenever possible, cross-checked with the ETF providers. It is stressed that information provided in this document can not be considered official and should be directly verified with the respective asset managers. Detailed information on the calculation methodology used can be found in the final section of this document. Quantitative analyses have been performed on past historical data that might not reflect the future performance of those instruments. The document is only presented as an indication of which qualitative and quantitative elements should be evaluated prior to investing in an ETF. In no circumstances could it be understood as a recommendation to invest in a financial instrument or enter into a transaction with a financial institution.

3 C O N T E N T Avant Propos... 3 About The Index: MSCI Daily Total Return Net World... 5 ishares MSCI World UCITS ETF (Inc)... 6 db X-Trackers MSCI World Index UCITS ETF... 8 Lyxor UCITS ETF MSCI World UBS ETF MSCI World UCITS ETF ComStage MSCI World TRN UCITS ETF Methodology Guide on how to read the figures... 19

4 Daily Tracking Error A V A N T P R O P O S In this third issue of our ETF Inside Out experience, Koris International provides a clear insight into the replication qualities of Exchange Traded Funds tracking the MSCI World equity index. Since we released our first chart, we have received extremely positive feedback from ETF investors that have finally access to straight and clear information for supporting their investment decisions. Our analysis can be accessed in less than the blink of an eye, the full report is available to go one step further and address more technical concerns. Below is the 30,000 feet analysis for the largest ETFs tracking the MSCI World equity index over a three years period. The methodology is fully described in the last section of this document % ETFs on MSCI World (31/05/ /05/2014) 0.012% 0.010% ishares MSCI World UCITS ETF (Inc) ER: 0.50% 0.008% UBS ETF - MSCI World UCITS ER: 0.30% 0.006% 0.004% ComStage MSCI World TRN UCITS ETF ER:0.40% Lyxor UCITS ETF MSCI World - EUR Share ER: 0.45% db X-Trackers MSCI World Index UCITS ETF ER: 0.45% 0.002% 0.000% -0.05% -0.10% -0.15% -0.20% -0.25% Yearly Tracking Difference -0.30% -0.35% Conclusions from this review broadly confirm what could be said from MSCI Emerging and MSCI Europe trackers, in a nutshell: - Garbage in, garbage out: once more our team has faced considerable issues when consolidating data and information from publicly available sources, including professional data feeds. Incorrect Net Asset Values and out of date information on fund setup seems to be the norm in the industry which makes the selection process a painful task. - Tracking difference an essential indicator: the absolute level provides you a very solid indication of the total costs of holding the instrument, while its stability over times will help investor assess the robustness of the investment process. Once more we notice widespread differences amongst providers, and significant variation of the yearly tracking difference over the period of existence of the funds. TD ranges from a little bit less than 15bps/annum to 30bps, less than the announced Total Expense thanks to stock borrowing and efficient tax reclaim structures. - Tracking Error to be looked at: the levels of daily tracking error varies significantly across the different providers and replication approaches, even when data has been thoroughly controlled; We do not see TE as an issue for mid and long term investors which remain the norm in the

5 institutional space, still too high tracking error levels might induce unwanted risk at the time of trading the funds. - Total Expense is irrelevant: once more we did not manage to find any correlation between the level of fees put forward by the provider and the overall quality of the products, investors would be wise not to put any attention to that element as the total cost of ownership is what in the end drives portfolio performance relative to the benchmarks. Summary of key statistical indicators ETF Average AUM ($'000) Expense Ratio Average Yearly Excess Return (Tracking Difference) (1) Daily Standard Deviation (Tracking Error) (1) Daily Excess Return 95% Value at Risk (1) Average Daily Volume 2013 ($'000) ishares MSCI World UCITS ETF (Inc) 3, % % 0.012% % 14,229 db X-Trackers MSCI World Index UCITS ETF 1, % % 0.002% % 5,358 Lyxor UCITS ETF MSCI World - EUR Share % % 0.002% % 3,438 UBS ETF - MSCI World UCITS % % 0.007% % 2,014 ComStage MSCI World TRN UCITS ETF % % 0.003% % 1,032 (1) Over comparison period (31/05/ /05/2014) Our investigation on the quality of ETF will now enter its second phase as we are currently conducting an extensive review of fixed income products, some initial results being presented over the summer at the rhythm of one index per month, until the end of the year. We strongly believe that the transparency brought to institutional investors in a systematic and unbiased way will definitively provide the appropriate incentive to industry participants to improve the replication quality and the overall cost structure imposed upon the end economic beneficiaries. Our experience in advising very large allocators to ETFs also leads us to believe that, beyond the pure performance and risk aspects of the ETFs themselves, more attention should be paid to the market structure in which they are negotiated and the way asset managers handle their execution flow in ETFs. Here again, lack and inconsistency of data is leaving investors in a stormy fog, we are therefore adopting a very similar approach by aggregating and controlling data, then providing insight to end investors who in the end will base their allocations on tangible information. Jean-René Giraud Founding Chief Executive Officer, Koris International

6 A B O U T T H E I N D E X : M S C I D A I L Y T O T A L R E T U R N N E T W O R L D GENERAL INFORMATION Bloomberg Ticker NDDUWI Index Base currency USD Creation date 31/03/1986 Asset Class Equity OBJECTIVE: The Index aims to capture the performance of large and mid cap equities across 23 Developed Markets countries. As of May 30 th 2014, the countries included in the index are: 1.Australia 9.Hong Kong 17.Portugal 2.Austria 10.Ireland 18.Singapour 3.Belgium 11.Israel 19.Spain 4.Canada 12.Italy 20.Sweden 5.Denmark 13.Japan 21.Switzerland 6.Finland 14.Netherlands 22.United Kingdom 7.France 15.New Zealand 23.United States 8.Germany 16.Norway MSCI INDEX METHODOLOGY 1 The index is free float market capitalisation weighted. The index is rebalanced quarterly (February, May, August and November). As of May 30 th 2014, the Index comprises 1,610 securities. When securities in local currency are included, there is no hedging of their performance in the index. NET DAILY TOTAL RETURN METHODOLOGY The Total Return index measures the market performance, including price performance and income from regular cash distributions. Income is reinvested in the index and thus makes up part of the total index performance. The Daily Total Return Net series approximates the minimum possible reinvestment of regular cash distributions. In the calculation of this index, MSCI uses the maximum withholding tax rate applicable to non-resident institutional investors that do not benefit from double taxation treaties. For index calculations, all dividends are converted into USD at the spot rate of the ex date. 1 More information available at

7 Millions USD I S H A R E S M S C I W O R L D U C I T S E T F ( I N C ) ETF STRUCTURE USD Share Class ISIN IE00B0M62Q58 DE000A0HGZR1 Jurisdiction Ireland Expense Ratio 0.50% Legal Structure Plc* Share creation costs 4bps** Creation date 28/10/2005 Share redemption costs 9bps** Base currency USD Decimalisation of shares No ETF Dividend policy Distribution NAV value 30/05/2014 $ Index exposure Direct (Physical) Index value 30/05/2014 $4, Replication model Optimised Replication ETF AUM 30/05/2014 $7, Mios Use of derivatives No Average AUM $3, Mios Securities lending Yes Securities lending Collateral Lending agent Nature BlackRock UK Advisors Limited Equities, Bonds, Certificate of Deposits and Cash Maximum level of lending 50% Custodian State Street Custodial Services Average level of lending (2013) <10% Maximum risk by counterparty 50% Fee redistribution 62.5% gross revenue Full ownership Yes * Public limited company ** Indicative values based on market conditions for a minimum investment amount of 1 share More information available at Segregation of assets Yes 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Assets under Management Notes on data: The public data had a one day lag from 28/10/2005 to 29/12/2010 which was corrected before computing the statistics. Data was adjusted with the dividends distributed quarterly. The dividend amounts are reintegrated to the ETF NAV on their ex-date.

8 I S H A R E S M S C I W O R L D U C I T S E T F ( I N C ) ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO Comparison Period 26/11/ /05/ % 15.46% -0.60% Period of Existence 28/10/ /05/ % 6.58% -0.13% 3 Last Years 31/05/ /05/ % 10.56% -0.26% 12 Last Months 30/05/ /05/ % 17.29% -0.21% 0.50% STATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE 3 LAST YEARS 12 LAST MONTHS Dates 26/11/ /05/ /10/ /05/ /05/ /05/ /05/ /05/2014 Mean % 0.000% % % Standard Deviation (Tracking Error) 0.080% 0.118% 0.012% 0.046% Percentile 5% % % % % Correlation % % % % # datapoints STATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE THE 3 LAST YEARS CALENDAR Dates 26/11/ /05/ /10/ /05/ /05/ /05/ /12/ /12/2013 Mean (Tracking Difference) % % % % Standard Deviation 0.422% 0.541% 0.101% Percentile 5% % % % # datapoints VOLUME ON ORGANIZED MARKETS USD SHARE CLASS - IE00B0M62Q58 Stock Exchange London Stock Exchange London Stock Exchange Deutsche Börse Ticker Bloomberg - Currency IWRD LN GBP IDWR LN USD IQQW GY EUR Listing Starting Date Nov-05 Oct-06 Feb-06 ADV on Listing Period ($ '000) 7,011 6,562 3,142 ADV on 2013 ($ '000) 14,229 12,049 6,513

9 Millions USD DB X - T R A C K E R S M S C I W O R L D I N D E X U C I T S E T F ETF STRUCTURE USD Share Class ISIN LU Jurisdiction Luxembourg Expense Ratio 0.45% Legal Structure OPCVM* Share creation costs variable** Creation date 19/12/2006 Share redemption costs variable** Base currency USD Decimalisation of shares No ETF Dividend policy Capitalization NAV value 30/05/2014 $ Index exposure Indirect (Synthetic) Index value 30/05/2014 $4, Replication model Unfunded swap ETF AUM 30/05/2014 $3, Mios Counterparty Risk Average AUM $1, Mios Swap counterparty Deutsche Bank AG Basket of securities Swap reset strategy - If there is a Subscription/Redemption - If the counterparty Maximum risk by counterparty 5% exposure > 5% Securities Lending * Organisme de Placement Collectif en Valeurs Mobilières ** Indicative values based on market conditions for a minimum investment amount of 1 share More information available at Nature Custodian Equities State Street Bank Luxembourg No 4,000 Assets under Management 3,000 2,000 1,000 0 Notes on data: The public data contained 3 wrong NAVs which were corrected before computing the statistics. This ETF also has 3 other share classes on which no analysis was done because they either have less than 3 years of existence or are not distributed on European markets.

10 D B X - T R A C K E R S - M S C I W O R L D I N D E X U C I T S E T F ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO Comparison Period 26/11/ /05/ % 15.46% -0.26% Period of Existence 19/12/ /05/ % 4.23% -0.21% 3 Last Years 31/05/ /05/ % 10.56% -0.27% 12 Last Months 30/05/ /05/ % 17.29% -0.36% 0.45% STATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE 3 LAST YEARS 12 LAST MONTHS Dates 26/11/ /05/ /12/ /05/ /05/ /05/ /05/ /05/2014 Mean % % % % Standard Deviation (Tracking Error) 0.003% 0.007% 0.002% 0.002% Percentile 5% % % % % Correlation % % % % # datapoints STATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE THE 3 LAST YEARS CALENDAR Dates 26/11/ /05/ /12/ /05/ /05/ /05/ /12/ /12/2013 Mean (Tracking Difference) % % % % Standard Deviation 0.063% 0.098% 0.072% Percentile 5% % % % # datapoints VOLUME ON ORGANIZED MARKETS USD SHARE CLASS LU Stock Exchange Deutsche Börse London Stock Exchange SIX Swiss Exchange Ticker Bloomberg - Currency XMWO GY EUR XMWD LN USD XMWO SW USD Listing Starting Date Jan-07 Sept-07 May-07 ADV on Listing Period ($ '000) 4,339 2,520 1,060 ADV on 2013 ($ '000) 5,358 2,

11 Millions USD L Y X O R U C I T S E T F M S C I W O R LD ETF STRUCTURE USD Share Class EUR Share Class (unhedged) ISIN FR FR Jurisdiction France Expense Ratio 0.45% Legal Structure FCP* Share creation costs 4bps** Creation date 26/04/2006 Share redemption costs 4bps** Base currency EUR Decimalisation of shares No ETF Dividend policy Distribution NAV value 30/05/2014 $ Index exposure Indirect (Synthetic) Index value 30/05/2014 $4, Replication model Unfunded swap ETF AUM 30/05/2014 $1, Mios Counterparty Risk EUR Share $1, Mios Swap counterparty Société Générale USD Share $ Mios Swap reset strategy Every day Average AUM $1, Mios Maximum risk by counterparty 10% EUR Share $ Mios Basket of securities USD Share $ Mios Nature Equities Securities lending No Custodian Société Générale Securities Services * Fonds Commun de Placement ** Indicative values based under normal market conditions for a minimum investment amount of 3M EUR More information available at 1,500 Assets under Management 1, Notes on data: Prior to the 02/10/2006, the ETF tracked the index on open and switched to close after that date. The analysis is conducted solely from the 02/10/2006. Until 10/04/2009, the ETF was valuated with a 1 day lag. This was taken into account before computing the statistics. For the EUR Share class analysis, the benchmark data is converted at the WM Reuters 17h EUR/USD rate.

12 L Y X O R U C I T S E T F M S C I W O R LD U S D S H A R E ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO Comparison Period 26/11/ /05/ % 15.46% -0.38% Period of Existence 12/12/ /05/ % 4.30% -0.24% 3 Last Years 31/05/ /05/ % 10.56% -0.20% 12 Last Months 30/05/ /05/ % 17.29% -0.18% 0.45% STATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE 3 LAST YEARS 12 LAST MONTHS Dates 26/11/ /05/ /12/ /05/ /05/ /05/ /05/ /05/2014 Mean % % % % Standard Deviation (Tracking Error) 0.025% 0.045% 0.002% 0.001% Percentile 5% % % % % Correlation % % % % # datapoints STATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE THE 3 LAST YEARS CALENDAR Dates 26/11/ /05/ /12/ /05/ /05/ /05/ /12/ /12/2013 Mean (Tracking Difference) % % % % Standard Deviation 0.256% 0.295% 0.044% Percentile 5% % % % # datapoints VOLUME ON ORGANIZED MARKETS USD SHARE CLASS - FR Stock Exchange London Stock Exchange London Stock Exchange SIX Swiss Exchange Ticker Bloomberg - Currency WLDD LN USD WLDL LN GBP LYWLD SW USD Listing Starting Date Jan-07 Nov-12 Nov-12 ADV on Listing Period ($ '000) 1, ADV on 2013 ($ '000)

13 L Y X O R U C I T S E T F M S C I W O R LD E U R S H A R E ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO Comparison Period 26/11/ /05/ % 14.27% -0.37% Period of Existence 02/10/ /05/ % 4.21% -0.24% 3 Last Years 31/05/ /05/ % 12.50% -0.21% 12 Last Months 30/05/ /05/ % 12.21% -0.16% 0.45% STATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE 3 LAST YEARS 12 LAST MONTHS Dates 26/11/ /05/ /10/ /05/ /05/ /05/ /05/ /05/2014 Mean % % % % Standard Deviation (Tracking Error) 0.010% 0.030% 0.002% 0.001% Percentile 5% % % % % Correlation % % % % # datapoints STATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE THE 3 LAST YEARS CALENDAR Dates 26/11/ /05/ /10/ /05/ /05/ /05/ /12/ /12/2013 Mean (Tracking Difference) % % % % Standard Deviation 0.246% 0.280% 0.061% Percentile 5% % % % # datapoints VOLUME ON ORGANIZED MARKETS EUR SHARE CLASS - FR Stock Exchange NYSE Euronext Paris Deutsche Börse Borsa Italiana Ticker Bloomberg - Currency WLD FP EUR LYXWLD GY EUR WLD IM EUR Listing Starting Date May-06 Nov-06 Sept-06 ADV on Listing Period ($ '000) 3,552 1,452 1,239 ADV on 2013 ($ '000) 3,438 2,183 1,591

14 Millions USD U B S E T F M S C I W O R L D U C I T S E T F ETF STRUCTURE USD Share Class ISIN LU Jurisdiction Luxembourg Expense Ratio 0.30% Legal Structure SICAV* Share creation costs 14bps** Creation date 25/06/2008 Share redemption costs 9bps** Base currency USD Decimalisation of shares No ETF Dividend policy Distribution NAV value 30/05/2014 $ Index exposure Direct (Physical) Index value 30/05/2014 $4, Replication model Full Replication ETF AUM 30/05/2014 $ Mios Use of derivatives No Average AUM $ Mios Securities lending Yes Securities lending Collateral Lending agent State Street Nature G10 Government Bonds and OECD countries Equities Maximum level of lending 50% Custodian State Street Average level of lending Maximum risk by counterparty Not applicable <10% (2013) Fee redistribution 60% gross revenue Full ownership Yes * Société d Investissement à Capital Variable ** Indicative values based on market conditions, there is no minimum investment amount More information available at Segregation of assets Yes 1,000 Assets under Management Notes on data: The public data was missing 135 NAVs that were added back into the series before computing the statistics.

15 U B S E T F M S C I W O R L D U C I T S ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO Comparison Period 26/11/ /05/ % 15.46% -0.38% Period of Existence 25/06/ /05/ % 5.41% -0.24% 3 Last Years 31/05/ /05/ % 10.56% -0.25% 12 Last Months 30/05/ /05/ % 17.29% -0.22% 0.30% STATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE 3 LAST YEARS 12 LAST MONTHS Dates 26/11/ /05/ /06/ /05/ /05/ /05/ /05/ /05/2014 Mean % % % % Standard Deviation (Tracking Error) 0.014% 0.019% 0.007% 0.003% Percentile 5% % % % % Correlation % % % % # datapoints STATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE THE 3 LAST YEARS CALENDAR Dates 26/11/ /05/ /06/ /05/ /05/ /05/ /12/ /12/2013 Mean (Tracking Difference) % % % % Standard Deviation 0.154% 0.177% 0.054% Percentile 5% % % % # datapoints VOLUME ON ORGANIZED MARKETS USD SHARE CLASS - LU Stock Exchange Borsa Italiana SIX Swiss Exchange Borsa Italiana Ticker Bloomberg - Currency WRDEUI IM EUR WRDGBA SW GBP WRDEUA IM EUR Listing Starting Date Aug-11 Jun-10 Oct-10 ADV on Listing Period ($ '000) 1,803 1, ADV on 2013 ($ '000) 2,014 1,642 1,001

16 Millions USD C O M S T A G E M S C I W O R L D T R N U C I T S E T F ETF STRUCTURE USD Share Class ISIN LU Jurisdiction Luxembourg Expense Ratio 0.40% Legal Structure SICAV* Share creation costs 7bps** Creation date 26/11/2008 Share redemption costs 7bps** Base currency USD Decimalisation of shares No ETF Dividend policy Capitalization NAV value 30/05/2014 $ Index exposure Indirect (Synthetic) Index value 30/05/2014 $4, Replication model Unfunded swap ETF AUM 30/05/2014 $ Mios Counterparty Risk Average AUM $ Mios Swap counterparty Commerzbank Securities lending Yes If there is a Lending agent Commerzbank Swap reset strategy subscription/redemption, if the swap exposure>10% Maximum risk by Maximum level of lending 100% 10% counterparty Basket of securities Average level of lending (2013) NA Nature Euro Denominated European Blue Chip Stocks Fee redistribution 100% Custodian BPSS Luxembourg Securities lending Collateral Nature * Société d Investissement A Capital Variable ** Indicative values based on market conditions for a minimum investment amount of 1 share More information available at Custodian Maximum risk by counterparty 100% Full ownership Segregation of assets Equities and Bonds BPSS Luxembourg Yes Yes 800 Assets under Management Notes on data: The public data had a one day lag from 26/11/2008 to 22/05/2009 which was corrected. It also contained 6 repeated or wrong NAVs that were taken out and corrected before computing the statistics.

17 C O M S T A G E M S C I W O R L D T R N U C I T S E T F ANNUALIZED RETURN ETF INDEX DIFFERENCE EXPENSE RATIO Comparison Period 26/11/ /05/ % 15.46% -0.19% Period of Existence 26/11/ /05/ % 15.46% -0.19% 3 Last Years 31/05/ /05/ % 10.56% -0.18% 12 Last Months 29/05/ /05/ % 17.50% -0.30% 0.40% STATISTICS ON THE DAILY DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE 3 LAST YEARS 12 LAST MONTHS Dates 26/11/ /05/ /11/ /05/ /05/ /05/ /05/ /05/2014 Mean % % % % Standard Deviation (Tracking Error) 0.041% 0.041% 0.003% 0.002% Percentile 5% % % % % Correlation % % % % # datapoints STATISTICS ON THE ANNUAL DIFFERENCE BETWEEN THE RETURNS OF THE ETF AND THE UNDERLYING INDEX COMPARISON PERIOD PERIOD OF EXISTENCE THE 3 LAST YEARS CALENDAR Dates 26/11/ /05/ /11/ /05/ /05/ /05/ /12/ /12/2013 Mean (Tracking Difference) % % % % Standard Deviation 0.106% 0.106% 0.107% Percentile 5% % % % # datapoints VOLUME ON ORGANIZED MARKETS USD SHARE CLASS - LU Stock Exchange SIX Swiss Exchange Deutsche Börse SIX Swiss Exchange Ticker Bloomberg - Currency CBMWORUS SW USD CBNDDUWI GY - EUR CBMWOR SW CHF Listing Starting Date Feb-10 Dec-08 Jul-10 ADV on Listing Period ($ '000) ADV on 2013 ($ '000) 1,

18 M E T H O D O L O G Y D A T A Our selection methodology consists in ranking all existing ETFs on the related index from largest to smallest average assets under management (in USD) from 2011 to 2013, with a minimum of 50M AuM. We then apply a track record filter restricting the selection to those ETFs with more than 3 years of existence. Finally, we select all ETFs from the five first providers that meet the two first criteria. The ETFs are presented in decreasing size order based on their average AUM over For the ETF, we use the official Net Asset Value (NAV), assets under management and trading volumes. Should an ETF distribute a dividend, the amount paid would be reintegrated into the ETF valuation on the ex-date, which is the reinvestment date. For the underlying index, we use the official index tracked by the ETF. The historical data is downloaded on a daily basis, according to the ETF NAV schedule. The expense ratio includes administration and management fees but not the swap fees (when applicable) nor the transaction costs. Volume on organized markets: The ADV is the Average Daily Volume of the ETF traded on the three main exchanges where it is listed. This statistic is computed on the listing period and on It is presented in thousands of USD and sorted by decreasing ADV on S T A T I S T I C S The statistics are computed over daily and annual basis. We compute several statistics for the analysis part: Annualized return: compounded over each given period and annualized over 365 days. Mean: arithmetic average computed over the whole data period for each chosen return periodicity. Standard deviation: computed on the overall available data for each chosen return periodicity. Percentile 5%: threshold value below which the worst 5% returns belong. Correlation: correlation coefficient of the daily and yearly return series between the ETF and the index. # Data points: number of available returns used for the daily and yearly calculations.

19 C H A R T S Assets under Management: daily series of the ETF total assets under management consolidated in USD throughout all existing share classes. Version of the methodology Date issued Change control 1.0 March 31 st 2014 Initial release. 1.1 April 30 th 2014 Historical charts removed pending review Inclusion of a three year time period

20 G U I D E O N H O W T O R E A D T H E F I G U R E S Tracking Error D E S C R I P T I V E S T A T I S T I CS The tracking error is commonly measured as the standard deviation of the differences between the returns of the ETF and those of the index. However, it excludes the drag component, which makes it possible to have a tracking error equal to zero in spite of large differences between the returns. This single measure is thus incomplete and we therefore provided several statistics that encompass each aspect of these differences. - Average difference of returns: It can be interpreted as the drag between the returns of the ETF and that of the Index. For each trading period it is the difference of returns the investor can expect to be exposed to. - Standard Deviation: Gives a measure of the dispersion of the differences around the abovementioned average. A large value is synonym to more uncertainty in evaluating the impact of investing in the ETF: on short investment periods, the differences might be quite far from the mean. On the contrary, a standard deviation equal to zero means that for each period, the difference of returns is equal to the average. - 5% percentile: Gives a measure of the extreme differences that might occur. It represents the threshold under which the 5% worst differences can be found. One year trailing difference This provides statistics on a one year long investment. The mean difference can be interpreted as the difference that one can expect on average when investing in the ETF for a period of one year. The standard deviation gives a measure of the dispersion of this difference: a low figure indicates that the difference of returns at the end of the one year period is generally quite close to the mean difference. On the contrary, a high figure indicates that the difference can differ widely among these one year investments. The 5% percentile represents an extreme case of such an investment.