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Lyxor stirs up ETF market

Lyxor Asset Management, a subsidiary of Societe Generale, has entered UK market with three exchanged-traded funds, including the first ETF to track the FTSE All Share index.

The company launched its first ETF in Europe in 2001 and now offers a range of 80 ETFs based on equity, bond, commodity, and sector indices listed on the seven European Stock Exchanges. It has euros 19.9bn in assts and recently expanded into Asia.

Lyxor believes there is a huge demand for ETFs that track UK indices. It conducted research that found that nearly two-fifths of the assets held in all UK– registered funds across all asset classes are invested in the UK All Companies, UK Equity Income and UK Smaller Companies sectors. It also found that over half of pure equity investments in UK-registered funds are in UK sectors.

The new ETFs are structured as French Sicavs and track the performance of three UK indices. Lyxor ETF FTSE All-Share provides exposure to the whole UK market in a single product with a total expense ratio of 0.4 per cent. The FTSE All Share Index includes the blue chip FTSE 100, the mid cap FTSE 250 and the FTSE SmallCap index. The total expense ratios for the Lyxor ETF FTSE 100 and Lyxor ETF FTSE 250 funds are 0.3 and 0.35 per cent respectively.

Lyxor believes the majority of returns come from asset allocation and that. ETFs can simplify asset allocation while keeping costs low. ETFs are similar to tracker funds that passively track an index but the difference is they can be traded like a share, enabling investors to get in and out of the market quickly, while providing diversity of shares like an Oeic or unit trust.

Lyxor ETF FTSE All-Share may attract interest from investors as it is offering something different to other ETF providers. The other two funds may face competition from the Barclays Global Investors iShares ETFs, which are more established in the UK but have a higher total expense ratio of 0.4 per cent.


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