A fund management firm has launched an exchange-traded fund (ETF) range designed to deal with the problem of crowded trades in ‘core’ products.
Legal & General Investment Management (LGIM) said it had “redefined” its core equity market-cap ETFs through a new index designed in partnership with Solactive that can help shield investors from unpredictable behaviour of crowded trading.
Crowded trading is experienced by equity indices commonly tracked by most core ETFs, while the risk from volatility is increasing with the rise of index investing, the firm said.
Responding to feedback from clients who had said they wanted more from core products other than low costs, LGIM said the new core equity range would ensure investors were not forced to turn over their portfolio at the same time as the vast majority of other core equity ETFs in the market where short-term price volatility frequently occurs.
Howie Li, head of ETFs at LGIM, said: “It’s right to expect more than just low-cost from core equity ETFs. Index managers need to be more active in mitigating the risks of crowded indices and engaging with companies for the long-term benefit of the market and investors. We have designed our range of core ETFs with these principles in mind, taking steps to promote long-term performance and stability.”
Additionally, the core equity ETFs will also ensure companies in the portfolio meet minimum standards for best business practices in order to mitigate risks that may affect long-term investment performance.
The ETFs, listed below, are traded on the London Stock Exchange.
L&G core equity ETF range of funds:
| Name | OCF* |
| L&G UK Equity UCITS ETF | 0.05% |
| L&G Europe ex UK Equity UCITS ETF | 0.10% |
| L&G US Equity UCITS ETF | 0.05% |
| L&G Global Equity UCITS ETF | 0.10% |
| L&G Japan Equity UCITS ETF | 0.10% |
| L&G Asia Pacific ex Japan Equity UCITS ETF | 0.10% |
*Expressed as a % per annum of the Net Asset Value of the Share class.
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