Legal & General Investment Management (LGIM) has expanded its thematic ETF offering in Europe with a global equities fund that integrates brand value as a core factor in the selection process.

LGIM has added a new ETF to its ‘Access’ range of non-traditional investment solutions.

The L&G Global Brands UCITS ETF has been listed on the London Stock Exchange in US dollars (LABL LN) and pound sterling (LAB2 LN), on Borsa Italiana in euros (LABL IM), and will soon also be available on Deutsche Boerse Xetra and SIX Swiss Exchange.

The Global Brands ETF sits within LGIM’s ‘Access’ range which is specifically designed to offer investors access to non-traditional investment opportunities.

The fund’s investment strategy is based on recognizing the enhanced financial performance exhibited by companies with top global brands. Strong brand equity is considered an economic moat that generates multiple benefits for firms including recognition, long-term loyalty among customers, lower price sensitivity, and the ability to easily roll out new products.

Richard Haigh, Managing Director at Brand Finance, a specialist in independent brand valuation and the data provider powering the ETF’s investment strategy, emphasized the financial significance of a strong brand for businesses: “A business’s brand is one of its most important financial assets. Used correctly, strong brands can unlock vast financial value for businesses and shareholders,” Haigh said.

Timo Pfeiffer, Chief Markets Officer at Solactive, the index provider for the ETF, further underlined the growth potential of companies with robust brands: “Strong and valuable brands often have a history of consistent growth and customer loyalty. The strategy can offer the potential for long-term capital appreciation as these companies continue to innovate and expand their market presence,” Pfeiffer said.

Methodology

The fund tracks the Solactive BrandFinance Global Brands Index which consists of companies from the Brand Finance Global 100, a list of the 100 firms worldwide with the strongest aggregate brand value.

Brand Finance’s methodology assesses brand value based on key metrics including brand investment, brand equity, brand performance, brand impact, and forecast revenues.

To be selected for the index, a firm must have a free float market capitalization of at least $200 million and an average daily value traded of at least $1 million.

In a bid to enhance the index’s responsible investment profile, the methodology also applies exclusion criteria related to environmental, social, and governance (ESG) factors. These criteria encompass well-established norms around the environment, human rights, corruption, and labor rights. Additionally, companies involved in controversial sectors such as tobacco, weapons, coal, conventional and unconventional oil & gas, nuclear power, gambling, and adult entertainment are removed.

Finally, the index categorizes eligible securities into ‘Technology’, ‘Finance’, and ‘Other’ based on their FactSet industry classification. A quality factor is calculated for the selected securities, and those falling below the bottom 5% within each category are excluded from the index.

Constituents that satisfy the above screening steps are weighted based on their total market capitalization subject to a single security cap of 5% to promote diversification.

The ETF comes with an expense ratio of 0.39%.