SocGen to offer “active trackers” on LSE
Societe Generale is to launch of a new generation of ‘Actively Managed Trackers’ (AMT) on the London Stock Exchange. The bank can now offer Asset Managers the opportunity to deliver an actively-managed, diversified portfolio in a transparent exchange traded product with a low management cost.
Asset Managers in partnership with Societe Generale can offer clients
product with active management, a lower minimum investment size and on-exchange liquidity.
Using a securitised derivative wrapper rather than an open-ended fund structure reduces the cost of creating and maintaining the product, thus allowing for a lower minimum trading size.
The aim of the AMT is to mirror the performance of a selection of underlying assets,like a classic tracker. The key difference, however, is that a “Weighting Manager Agreement” enables the asset manager (who will be regulated by the Financial Services Authority and permitted to give investment advice) to change the weightings of each asset in the portfolio on a regular basis.
The name of the asset manager, the frequency of the rebalancing and the different basket of assets will be clearly stated in the Final Terms of the product, along with an extract of the Agreement in order to provide investors with all the relevant information required to assist them
in making their final investment decision.
In the same way as an Exchange Traded Fund or Exchange Traded Note, the holder of an Actively Managed Tracker will pay an annual management fee which is charged on a daily basis. The Weighting Manager receives a portion of these fees. All fees are clearly disclosed in the Final Terms.
The first product, launched at the beginning of February 2011, allowed Parkstone AM to allocate between four different asset classes; UK Equities via the FTSE Total Return index; a Commodity Lyxor ETF; a GILT Lyxor ETF; and Cash.
Parkstone AM can adjust the weightings as required on a weekly basis. Investors can buy or sell the Societe Generale issued Tracker like an ETF or share on the London Stock Exchange during market hours, with Societe
Generale providing liquidity for these products by quoting live bid and offer prices.
The risk profile of the allocation is similar to a direct investment in the underlying assets. Therefore capital is at risk. As the weightings of each component are actively managed by a third party, there is a risk of underperformance.