L&G launches commodity ETF with Source

Legal & General Investment Management has launched a commodity index tracking product with exchange-traded product provider Source.

The LGIM commodity composite Source ETF, will track the LGIM Commodity Composite index, which aims to give “broad-based commodity exposure”.

LGIM head of strategy implementation Graeme Dewar says there has been increasing demand for exposure to the asset class from institutional clients.

He says: “Our solution has been to develop an innovative type of benchmark index that includes a minimum of three constituent sub-indices. 

“These sub-indices are selected using LGIM’s experience and core skill set to deliver a high quality, dynamic commodity composite index.”

Under the Source structure, the London-listed ETF will operate with a swap overlay and have four swap conterparties: Barclays Capital, Citigroup, JP Morgan and UBS.

Ted Hood, chief executive of Source, adds: “Single-commodity ETCs are useful for investors who want to build a tailored portfolio.

“But, like LGIM, we see the need for a well-constructed commodity index, providing diversified exposure, at a reasonable cost and in a UCITS-compliant fund.”

The exchange-traded product has a management fee of 0.4 per cent and an average swap fee of 0.45 per cent.

Four indices have been included in the composition of the LGIM index, including the Barclays Capital commodity index pure beta total return, Citi CUBES index total return, JPMCCI Ex-Front month energy light index (total return) and UBS Bloomberg constant maturity commodity index.