Legal & General Investment Management has expanded its thematic ETF platform in Europe with the launch of four new growth-oriented funds targeting disruptive technologies.
LGIM has added four new products to its thematic ETF platform in Europe.
Three of the new products capture opportunities related to the metaverse, optical technologies & photonics, and emerging cyber security.
They are the L&G Metaverse ESG Exclusions UCITS ETF (MTVR), L&G Optical Technology & Photonics ESG Exclusions UCITS ETF (LAZR), and L&G Emerging Cyber Security ESG Exclusions UCITS ETF (ESPY).
The fourth fund – the L&G Global Thematic ESG Exclusions UCITS ETF (THMZ) – allows investors to gain exposure to multiple themes through a single wrapper.
All four ETFs have been listed on the London Stock Exchange in US dollars and pound sterling as well as on Deutsche Boerse Xetra, Borsa Italiana, and Six Swiss Exchange in euros.
The funds are global in nature, selecting their constituents from a broad universe of developed and emerging market stocks with market capitalizations greater than $200 million and average daily trading volumes above $1m.
Each ETF also incorporates an ESG overlay that excludes violators of UN Global Compact principles as well as companies involved in certain controversial industries such as weapons, tobacco, oil & gas, thermal coal, and nuclear power.
Commenting on the new products, Aanand Venkatramanan, Head of ETFs, EMEA, LGIM, said: “Thematic investment strategies have seen strong investor interest over recent years, thanks to their ability to capitalize on structural and foundational changes in the way we live and work. As we have continued to build our thematic ETF range, we have sought to provide investors with purer and differentiated access to new and emerging themes that are shaping the future.”
James Crossley, Head of UK Wholesale Distribution at LGIM, added: “Thematic investing is about identifying opportunities that can drive structural and fundamental changes in our lives, work, and society. Investment strategies targeting these trends have seen strong interest from clients for many years. We believe these new funds provide a comprehensive addition to our ETF range, both for investors looking for purer exposure to themes, but also for those seeking to invest in a diversified way without having to pick and choose between themes.”
Metaverse
The metaverse refers to the next frontier of the internet – a virtual reality-enabled digital world in which people can work, travel, play, and live. Analysts and companies believe the growth potential of the metaverse is significant with Meta Platforms alone spending more than $10 billion on metaverse-related R&D last year.
The metaverse is still in its infancy, however, and its development requires the intersection of multiple different technologies across hardware, software, networks, and digital payments.
The L&G Metaverse ESG Exclusions UCITS ETF seeks to capture opportunities across the potential metaverse value chain by tracking the iStoxx Access Metaverse Index.
The index identifies firms that derive at least 20% of their revenue from the following metaverse-related business segments: 3D Application Development, Augmented & Virtual Reality, 5G Enabling Technology, Payment & Asset Services, High-Performance Computing & Data, the Internet of Things; and Social Media & Gaming.
Constituents are weighted by float-adjusted market capitalization subject to a single security cap of 5%.
The ETF’s expense ratio is 0.39%.
Optical technology & photonics
Optical technology and photonics refer to the science of creating, manipulating, transmitting, and detecting light. The industry’s far-reaching impact includes smartphone displays, precision agriculture, automotive sensors, fiber-optic broadband, and laser surgery, among others.
The photonics industry is estimated to be growing at more than twice the rate of global GDP, while the European Commission has recognized optical technology as a key enabling technology of the 21st century, capable of bridging the gap between the physical world and the systems that exist within it.
The L&G Optical Technology & Photonics ESG Exclusions UCITS ETF is the first ETF in Europe to target the optical technology and photonics theme.
The fund is linked to the Solactive EPIC Optical Technology & Photonics Index which leverages the expertise of the European Photonics Industry Consortium (EPIC), the largest photonics industry association in the world, to identify companies that derive at least 50% of their revenue from photonics manufacturing.
Firms that are providers of solar energy solutions, manufacturers of LCD and OLED displays, and manufacturers of epitaxial wafers will not be eligible for inclusion.
Constituents are equally weighted in the index.
The ETF’s expense ratio is 0.49%.
Emerging cyber security
LGIM already offers one of the largest cyber security ETFs in Europe – the $2.5bn L&G Cyber Security UCITS ETF (USPY LN) – which was launched in 2015.
The firm notes, however, that rapid innovation underscores the cyber security industry and new technologies are constantly required if companies are to stay ahead of cyberattacks. Consequently, the industry has seen a significant expansion in segments that cyber security companies specialize in.
The L&G Emerging Cyber Security ESG Exclusions UCITS ETF reflects this evolution by focusing on emerging segments such as hardware security, threat intelligence, and blockchain-enabled security solutions in addition to existing growth segments such as cloud and network-related security solutions that are also captured in the previous fund.
The new ETF is linked to the Solactive Emerging Cyber Security Index which harnesses the insights of Juniper Research to identify cyber security companies with at least 50% revenue exposure to existing growth segments or more than 10% revenue exposure to emerging segments.
Constituents are also equally weighted in the index.
The ETF’s expense ratio is also 0.49%.
Multi-thematic
The L&G Global Thematic ESG Exclusions UCITS ETF is linked to the Solactive L&G Global Thematic Index which brings together nine investment themes in the areas of technology, energy & resources, and changing demographics, all of which are currently available to investors via existing LGIM thematic ETFs.
Constituent ETFs are weighted in order to minimize portfolio volatility while adhering to a cap and floor of 20% and 5%, respectively, as well as a maximum two-way turnover of 20% compared to the previous reconstitution and rebalance.
The ETF’s expense ratio is 0.60%.