Smart beta deal with JP Morgan gains Lyxor ETFs “strong interest”

Lyxor has raised €123 million of assets since it began launching smart beta exchange-traded funds (ETFs) on JP Morgan indices last year.

Paris-based Lyxor struck the deal to use JP Morgan factor indices in June 2015 and has since launched five European single-factor funds and two multi-factor products, one European and one global.

James Waterworth, vice president of ETF sales for UK & Ireland at Lyxor Asset Management, said there had been strong investor interest in the smart beta ETFs and that the firm’s ambition is to build a complete, homogenous range of single- and multi-factor exposures.

“The advantage of a multi-factor approach is the diversification gained from spreading risk across factors that tend to have low historical correlation with one another – so when some factors are down, others may be up to compensate,” Waterworth told Funds Europe.

A spokesperson for JP Morgan said the multi-factor ETFs were attracting interest from long-only equity investors who wanted to investigate factor-based investing.

“There is much debate in the market about investments into equity risk factors and whether they can be timed successfully. The range of single-factor ETFs are tools allowing investors to take tactical exposure to various risk factors in an efficient manner,” said the spokesman.

“The market is still in an education phase but a growing number of investors are interested in the topic.”

The single factor ETFs focus on the five core factors that JP Morgan and Lyxor believe explain up to 99% of the variability of equity market returns: value; low size; quality; low beta and momentum. The multi-factor ETFs equally weight the factors.

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