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LGIM’s commitment to thematic ETFs is client driven


Client feedback lies behind the extension of LGIM’s range of ETFs says Howie Li, Head of ETFs at LGIM.

Thematic equities are the order of the day, with LGIM launching three new ETFs focusing on the investment opportunities created by innovations in artificial intelligence (AI), healthcare breakthroughs and clean water.

These new ETFs join 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.
Li says that the standout product has been the cyber security ETF which has shot up with year to date returns of over 25 per cent.
Li explains that they build these thematic products from the bottom up, so that they can evolve with the theme, capturing the changing dynamics of the markets involved. LGIM’s active-like approach to index construction means that the stocks within these thematic ETFs are designed to not only cut across traditional industry classifications, but also disrupt the incumbent large-caps that typically dominate conventional sector-based indices.
Last year’s launches from LGIM included a pharmaceutical breakthrough ETF, while this new healthcare ETF is, Li says, more about the digital solutions that go into healthcare where technology is driving the shape and change in the industry.
“This one’s about medical diagnostics, regenerative and precision medicine and how healthcare innovations can use digital technology driven by data and analysis to give patients a better experience and outcome,” Li says.
The new clean water ETF stands out from other general water funds as it is specifically focused on clean water, with an index constructed with expert input from Global Water Intelligence.
“It’s a very important distinction to look at clean water,” Li says. “The last decade has seen water as a utilities investment, a defensive, dividend paying sector which had nothing hugely innovative or special about it.
“The reason why we wanted to focus on clean water is that long term shift to understanding how we are going to have global sustainable clean water as the world’s population continues to expand and emerging economies continue to develop. The draw on this resource becomes a lot more important and regulatory pressure and social consciousness is driving this.”
The clean water ETF fits into the ESG theme, to which LGIM has a big commitment.
“To integrate the UN’s Sustainable Development Goals into a portfolio cohesively is not that simple,” Li says. “However, a thematic lens with a specific target towards clean water solutions offers a way for ESG focused investors to take a direct exposure into that space.”
The new AI ETF is also an extension of the existing robotics ETF with the same ROBO Global team behind it, but this one takes an even deeper dive into AI, sitting alongside the existing ETF but looking at technology focused firms that are investing for the future in the development of their AI capabilities.
“Thematics are a great place to engage with the LGIM client base,” Li says, adding that this continues to expand out of the UK and across Europe as well.

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