Invesco Ltd (NYSE: IVZ) has launched a UCITS ETF that offers investors access to the Kuwait equity market.
This comes as a development of the inclusion in the MSCI Emerging Markets Index planned for 2020.
The Invesco MSCI Kuwait UCITS ETF provides exposure to approximately 85% of the market capitalisation in Kuwait, including companies involved in the nation’s various economic and cultural development projects.
With more than half of total GDP coming from petroleum export revenues, the Kuwait government has started a seven pillar program called the “New Kuwait Vision 2035”.
The purpose of this program is to diversify the economy and transform Kuwait into a financial, cultural and institutional leader in the region.
This includes creating more sustainable housing, developing infrastructure, improving health care services and education, and making the government more transparent and efficient.
Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, said: “With an index comprising financials, communication services, industrials, real estate and materials sectors, our new ETF offers investors the opportunity to gain exposure to those companies at the heart of the long-term transformation taking place in Kuwait. In the shorter term, the inclusion into the MSCI Emerging Markets Index could drive significant inflows from asset managers needing to maintain benchmark weights.”
However a few key investment risks were outlined in the Invesco trading statement released this morning, they are as follows:
- The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
- This fund enters into transactions which expose it to the risk of bankruptcy, or other types of default, by the counterparties to those transactions.
- As this fund invests in companies from a single country, investors should be prepared to accept a higher degree of risk than an ETF that is geographically diversified.
- This fund enters into swap agreements which provide the performance of the Reference Index. These imply a range of risks including the possibility of an adjustment to, or even the early termination of, the swap agreement.
This is an interesting move from Invesco, as they look to diversify and utilize untapped global markets.
However, with all the optimism there has to be an element of caution as outlined within the trading statement.
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