LGIM partners with Gerd Kommer on global multi-factor ETF

Jun 21st, 2023 | By | Category: Equities

Legal & General Investment Management (LGIM) has launched a new global equities ETF that is guided by German asset manager Gerd Kommer’s multi-factor investment process.

Gerd Kommer, CEO at Gerd Kommer Invest

Dr. Gerd Kommer, CEO at Gerd Kommer Invest.

The L&G Gerd Kommer Multifactor Equity UCITS ETF has been listed on Deutsche Börse Xetra in euros where it is available in accumulating (Ticker: GERD GY) and distributing (K0MR GY) share classes.

The fund tracks the Solactive Gerd Kommer Multifactor Equity Index which is based on Dr. Gerd Kommer’s “world portfolio concept” which he developed over a 30-year career in the financial services sector.

According to Dr. Kommer, the strategy is designed to minimize the influence of emotional reactions on investment decisions by, instead, pursuing a scientific and rules-based approach centered on economic theory and empirical analysis.

Methodology

The index is constructed from an initial broad universe comprising large, mid, and small-cap stocks from both developed and emerging markets worldwide.

A light sustainability screening removes violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms with business activities linked to controversial weapons or coal. Any company with carbon emissions that are within the highest 3% of companies from the same country is also excluded.

Following this ESG screening, the methodology determines the index’s country weights based on an equal combination of current GDP data and total free-float market capitalization, a process that notably reduces the influence of US-listed stocks down to 42.8% from 57.6% in the initial universe.

Within each country, constituents are weighted using an optimization process that seeks to maximize the index’s overall multi-factor score (based on size, value, quality, investment, and momentum factors) while ensuring individual factor uplifts of at least 20% per factor. Individual securities are also capped at a maximum weight of 1%.

If the optimization is unable to satisfy all of the above objectives, it may relax certain constraints related to country weights or individual factor uplifts until a solution is found.

The index is rebalanced on a quarterly basis.

The ETF comes with an expense ratio of 0.50% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Gerd Kommer, CEO at Gerd Kommer Invest, commented: “We are pleased to collaborate with LGIM, a very experienced partner when it comes to the development, launch, and market implementation of ETFs. The partnership has enabled us to launch a strategy that draws on our 30+ years of capital markets expertise, research capabilities, client experience, and scientific knowledge of wealth creation. We believe this proposition should allow certain investors to cover their equity allocation in one single product. To date, this is a unique proposition in Germany, Austria, and Switzerland.”

Aanand Venkatramanan, Head of ETFs, EMEA, at LGIM, added: “With this partnership, we have combined our respective strengths to design an ETF solution that does not yet exist in the German-speaking ETF market. It will leverage Gerd Kommer’s strong brand locally, combining the investment philosophy of their “world portfolio concept” with our extensive experience in the development and distribution of ETFs. The ETF is characterized by an active bottom-up approach and the active development of investment strategies, which will allow us to help meet the evolving needs of our clients and to differentiate our offering.”

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