Legal & General Investment Management (LGIM) has expanded its range of thematic exchange traded funds (ETFs) with the launch of three new funds capturing the investment opportunities created by innovations in artificial intelligence, healthcare breakthroughs and clean water.
The launch adds to LGIM’s existing thematic and core ETFs, which include the USD904 million L&G Cyber Security UCITS ETF and USD919 million L&G ROBO Global Robotics and Automation UCITS ETF.
The ETFs are designed to invest in markets that are experiencing the potential for rapid growth due to significant changes driven by technological advancements, providing investors with access to pioneering companies that are creating solutions to longstanding challenges.
To provide investors with exposure to these themes, LGIM has developed unique indices through active research into these markets with industry experts at ROBO Global and Global Water Intelligence, who provide unique industry insight and fundamental research across the full value chain of the relevant theme.
LGIM’s active index construction means that the stocks within these thematic ETFs not only cut across traditional industry classifications, but also disrupt the incumbent large-caps that typically dominate conventional sector-based indices. Well designed bottom-up indices can moreover evolve with the theme, whereas a more static index may not capture the changing dynamics of the markets involved.
These new ETFs, which are listed on the London Stock Exchange provide diversification across geographies, market capitalisation and sub sectors. Each of the funds uses full physical replication to offer investors direct and pure exposure to the theme. The bottom-up and concentrated approach helps investors to minimise overlap and over-exposure across their existing portfolios: for example, across LGIM’s five pre-existing thematic ETFs, the average overlap in holdings with the MSCI World index is just 1.92 per cent and the average weighting to small and mid-caps is 56 per cent.
Artificial Intelligence (AI) technologies could increase global GDP by USD15.7 trillion by 2030 and the L&G Artificial Intelligence UCITS ETF will seek returns from the global market for AI solutions and applications, in which revenues are projected to grow from USD16.2 billion in 2018 to USD31.2 billion in 2025[1]. In terms of index exposure, the fund will include companies building AI engine and platform solutions, as well as those applying AI capabilities for the purpose of digital transformation.
Taking advantage of the opportunity in healthcare, which accounted for 18 per cent of US GDP in 2017[2] and is anticipated to be an USD8.7 trillion global industry by 2020[3], the L&G Healthcare Breakthrough UCITS ETF will be formed of companies leading in the digitalisation of the healthcare supply chain, advances in healthcare robotics and next-generation diagnostic tools.
By 2025, 1.8 billion people will be living in countries or regions with absolute water scarcity; two-thirds of the world’s population could be living under water-stressed conditions[4]. Investors in the L&G Clean Water UCITS ETF will seek returns from an index which is focused on companies integral to the world’s management of water, including those engaged in water production, processing and the provision of other related services.
Howie Li, Head of ETFs at LGIM, says: “All sectors and businesses are being transformed by disruptive technology and we’re seeing increasing demand from investors looking to access these themes in a cost-efficient way. These new funds offer investors the opportunity to hold companies directly benefiting from these themes, with bespoke indices constructed around active selection and research and implemented in a systematic and rules-based way.”
