Lyxor said it is to switch key European, Global and US ETFs to physical replication.
Following the switch, over half of Lyxor’s assets (€25bn) will be in physical ETFs. The company claimed it will make it the third largest physical ETF provider in Europe.
Lyxor’s use of physical replication started in 2012 with the switch of its government bond ETFs, that has been expanded to other blue chip equity exposures (CAC 40, DAX, IBEX 35).
Commenting on the plans ahead, Arnaud Llinas, head of ETFs and Indexing, said: “Our priority is to create efficient funds that track precisely and trade at the lowest possible cost to investors. Achieving this across a range as diverse as ours demands flexibility.
“There is simply no single replication method that works best in every case. We aim to take the best of both worlds, and use each method where it works best for investors, not just today but for the future. Evolving market conditions mean we can now track developed markets better physically, so that is what we will do.”
Lyxor will now favour physical replication for developed market exposures, and synthetic replication where it can improve efficiency in more complex market exposures (such as emerging markets).
Lyxor’s flagship Euro Stoxx 50 fund (MSE), managing over €7.6bn in assets, will be the first ETF concerned by the switch on 3 November 2015. Other European, Global and US ETFs will follow over the course of the next twelve months.
Since the start of 2015, Lyxor ETF has recorded more than €7bn in net new inflows. With more than 220 ETFs listed on 13 regulated exchanges across the world, Lyxor ETF has over €44.2bn of ETF assets under management as at 30 September 2015.