Lyxor switches three ETFs to physical replication

IndicesLyxor Asset Management says it will switch three exchange-traded funds (ETFs) tracking European equity indices from synthetic to physical replication for efficiency.

The three funds track the CAC 40, IBEX 35 and DAX – stock indices from France, Spain and Germany, respectively – and together hold €5 billion of assets.

As synthetic ETFs, the funds employ derivatives to gain exposure to their index. However, as of July 11, Lyxor will manage the funds as physically replicating ETFs, which means they will be directly invested in the stocks that make up the underlying indices.

“Our strategy is to offer our clients the most efficient ETFs by selecting the most appropriate replication method for each index,” says Arnaud Llinas, global head of ETFs and indexing at Lyxor. “We believe we can now offer a better product on the CAC 40, IBEX 35 and DAX by using a direct replication method.”

Lyxor says its assets under management rose 13% in the first five months of this year, thanks partly to a net inflow of $3.5 billion (€2.6 billion).

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