Lyxor Asset Management has launched two new ’risk-balanced’ ETFs on NYSE Euronext Paris. These new funds are the first of a range of ETFs that are based on a new generation of smart indices, which balance their component assets according to risk.
The behaviour of equity markets over the past decade has made it increasingly important for investors to reduce risk concentration and increase diversification. Lyxor’s smart index funds offer a more efficient and less volatile alternative to traditional market cap-weighted indices. Through these ETFs, investors can benefit from indexing technologies that put risk management at the centre of portfolio construction, whilst maintaining Lyxor’s commitment to liquidity, transparency and efficiency.
The Lyxor ETF SMARTIX Euro iSTOXX 50 Equal Risk provides exposure to Eurozone equities through the EURO iSTOXX 50 Equal Risk Index. The index, which is calculated by STOXX, has the same universe of securities as the Euro STOXX 50, but aims to better diversify risk by controlling stock weights according to the risk that they contribute. This approach is based on Lyxor’s proprietary Equal Risk Contribution (ERC) methodology, which spreads risk equally among all assets in the portfolio. The Lyxor ETF SMARTIX Euro iSTOXX 50 Equal Risk is suitable for investors who are looking to gain more balanced and diverse exposure to the Eurozone equity market.
LYXOR ETF MSCI World Risk Weighted provides exposure to world equities. The MSCI World Risk Weighted index that the ETF tracks has the same universe of securities as the MSCI World index. However, it aims to reduce risk in the portfolio by weighting each constituent stock according to risk, as measured by its volatility: the higher the risk of a constituent, the lower its weight. The aim of this is to reduce the overall volatility, and therefore risk of the portfolio by limiting exposure to highly volatile stocks. The ETF MSCI World Risk Weighted is suitable for investors seeking to gain less volatile exposure to world equity markets.