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Low cost core ETFs earn Lyxor boom year

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Adam Laird, Head of ETF Strategy, Northern Europe, Lyxor ETF, reports that product launches have resulted in a strong 2018 for the firm. The boom has come from its March launch of a new range of 16 low cost Core ETFs. They cover the major equity markets as well as gilts and TIPS on the fixed income side. The TER on each fund in the range is less than 0.12 per cent with two funds – Lyxor Core Morningstar UK NT (DR) UCITS ETF and Lyxor Core Morningstar US (DR) UCITS ETF – charging 0.04 per cent TER.

“It was an important moment for us because we could launch the lowest cost core range of ETFs available in the European market,” Laird says. “The range has done really well raising over EUR1 billion so far this year.”

The range is a mix of new low cost funds, and existing funds whose charges have been cut. However, quality was a focus for Lyxor in launching the range.

“We aren’t cutting corners in our core range. These ETFs are fully physical with no stock lending. We are keen to ensure there’s no skeletons lurking in the closet,” Laird says.

The main users of the range have been private banks, wealth managers and multi-asset investors.

“The important point is that it shows that fees are still one of the biggest drivers of ETF growth,” Laird says. “It’s not a new story, but investors are much more critical of the costs they are paying for investments and the MiFID rules, that came in at the start of this year, have also put a fresh emphasis on accountability for the costs investors are paying.”

Laird reports that from the Lyxor point of view, the firm has expanded out its team of relationship managers in the UK this year. “We have grown our team and we have been much more in contact with the networks of investors and we talk to many more offices than we were before,” Laird says.

“There has definitely been a much higher proportion investing in ETFs than before,” he says. “I think the important point is that we no longer need when we are meeting to explain what an ETF is. They know that and they want to hear what they do and what they should be investing in.”

Mainstream markets, such as those represented by Lyxor’s new core range of products, are still the bulk of the wealth managers’ portfolios.

Laird points out that traditionally Lyxor has been managing quality core investments for a long time. Lyxor’s Euro Stoxx 50 ETF was first launched 2001 and Lyxor was the first issuer to launch a US equity fund 17 years ago.

“But our specialism was on innovative products and our big sellers had been more niche areas. Inflation protection, smart cash funds or our quality income range have performed well but they are still satellite investments. With the launch of this range we are now being used as the core in wealth managers’ portfolios.”

Looking to the future, Laird believes that simple, mainstream markets will be core to Lyxor’s success.

“We’re in a fortunate position that we’ve got almost two decades of ETF experience. We have the resources and expertise to run simple, mainstream investments. Markets are uncertain enough, investors expect simplicity. That’s where we will see the growth.”

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