Investments  

Lyxor ETF, the power to perform in any market

This article is part of
Exchange Traded Funds - October 2013

Lyxor Asset Management has a heritage of offering advanced asset management techniques and specialist investment solutions, perhaps most notably in its range of exchange-traded funds, which are a cornerstone of its proposition.

It entered the ETF business during the sector’s infancy in 2001, building it up to cover 170 indices today, with $41 Bn in assets under management. It is now the third most prominent player in Europe and the sixth on the global stage.

“We are certainly a historical player, developing a range covering the basic indices in the beginning, concentrating on equities until 2005.

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“Since 2005, we have progressively introduced fixed income and commodities to reach a stage where we have all the major asset classes and areas of the world covered,” explains Arnaud Llinas, global head of Lyxor’s ETF and indexing business. “After just over 12 years of development we believe we now have a comprehensive toolbox for investors to allocate assets through.”

For Mr Llinas, what sets the Lyxor ETF proposition apart from its competitors is not only the benefits usually associated with investing using an ETF, which include transparency, liquidity and cost efficiency, but also the way in which the company itself operates.

He explains: “A client once told me that the key reasons he chose an ETF was because he could get his money back easily if he needed it, and because it delivers exactly what is written in the prospectus. The third benefit is it is very cheap, with management fees globally at below 30bps per year. However, it is important to stress that investors should consider the full cost of owning an ETF, which means looking at tracking efficiency and the Bid / Ask spread as well.

“In addition to that, Lyxor has developed its quality charter with the aim of communicating our principles in terms of fund management, risk and the organisation of the environment around us. First, in terms of asset management principles, we want to be as transparent as possible so we have worked on our website over the past few years so it displays exactly how our funds are structured, what is in each fund, how we use securities lending and how we use derivatives. We want to explain in detail how all the funds work.”

“Second, we have worked to establish a band of authorised participants – or market makers – that is big enough to provide liquidity at any time. That is a key differentiator for me as, while it is not complicated to have a listed index fund, it is more complex to have a fund that is animated by several brokers who can make sure that at any point you can find a price on the bid or the offer side. We are committed to providing that.”

At the moment Lyxor has 49 authorised participants, including brokers, investment banks or electronic market makers who are able to boost liquidity on the primary market before distributing the funds on the secondary market. Further, it prides itself on its clarity in reporting and in communicating details such as the replication methods it uses.