Timing is everything for exchange traded fund (ETF) providers given the current popularity of the product, and this month there has been a raft of key announcements in the marketplace.
Client demand is the reason behind a series of product-linked initiatives in Europe and Asia, including an exchange traded note tracking the spot price of gold and revisions to how the net asset value (NAV) of equity and commodity ETFs is worked out, says Lyxor Asset Management, one of Europe’s biggest ETF managers.
The Lyxor ETN Gold, listed on the London Stock Exchange last month, tracks the performance of the gold spot price; in other words the price quoted to traders at the time of asking. Importantly, it is believed to be one of the most straightforward and efficient ways into the commodities asset class for investors.
If a pension fund had invested in gold this time last year it could have been sitting on a four per cent yield today, compared to fall of 30 per cent in UK equities and a 40 per cent fall in global equities over the same period, according to Bloomberg data. The only asset class that outperforms gold is fixed income, which has raked in around 9 per cent in the last 12 months.
Investors can go long with the Lyxor ETN Long Gold, which given the value of gold has held over five years (an annualised return of around 19 per cent) could prove fruitful. Recent research shows commodity ETFs are making the most advances in terms of net inflows, followed by cash and bond ETFs.
In the emerging Asian ETF market, launches are beginning to gather pace. Five new Lyxor ETFs have been listed on the Singapore Stock Exchange (SGX), four of which will cover indices outside Asia and the US for the first time on the local bourse.
As part of the SGX offering, Lyxor’s ETF Eastern Europe gives investors exposure to equities from Hungary, the Czech Republic and Poland – covering a market cap of about €78bn. The ETF MSCI Emerging Markets aims to replicate the performance of the MSCI EM Index, comprising 738 stocks in 23 global emerging markets and a market cap of €1.5trn. There is also an ETF tracking the performance of the EM Latin American Index, which includes companies in Argentina, Brazil, Chile, Colombia, Mexico and Peru, with a total market cap of €335bn.
These listings should give Singapore investors ample opportunities for exposure to emerging markets, and with the surety they are trading in the liquid – and secure – SGX, believes Joseph Ho, managing director and head of ETFs, Asia-Pacific at Société Générale, Lyxor’s owner. “While there are still disagreements over when and in what shape the recovery will come, a global range of ETF products providing easy access is likely to benefit investors, large and small alike,” he says. “Recent strong performance in markets like Taiwan, Korea and China illustrates the value of providing choices.”
The listing of the five ETFs on SGX bring the total ETF basket to 35 and extends the ETF portfolio coverage beyond the comfort zones of Asia and the US. Lyxor is already the most prolific ETF issuer in Singapore, and now provides 18 ETFs on SGX.
This month, Lyxor also modified how NAV is calculated for its ETF product. “The change is motivated by the willingness to better serve clients,” says the asset manager, announcing slight revisions to how the NAV of a fund is worked when the market closes. It is the second time Lyxor has reviewed this, the first was in 2006. NAV will now be calculated taking the day’s closing price, rather than the index closing price of the day.
