Lyxor launches Fed Funds US dollar cash ETF

Jul 7th, 2015 | By | Category: Fixed Income

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Lyxor, a leading European provider of exchange-traded funds, has announced the launch of the Lyxor Fed Funds US Dollar Cash UCITS ETF (FEDF IM). Listed on the Borsa Italiana, the ETF tracks the performance of the Soloactive Fed Funds Effective Rate Total Return Index, providing investors with an opportunity to replicate the performance of a notional US dollar deposit invested at the Federal Funds Rate with daily re-investment of interest earned. The fund is denominated in euros and is thus exposed to fluctuations in the dollar/euro exchange rate.

Lyxor launch ETF tracking notional investments at the Federal Funds Rate

Arnaud Llinas, Head of ETFs and Indexing at Lyxor

Arnaud Llinas, Head of Lyxor ETFs and Indexing, said: “Lyxor which is continuously expanding its fixed income range, now makes available a new solution for investor’s USD liquidity management needs, through an ETF. We are pleased to further develop our cooperation with an index provider such as Solactive, in order to bring with this product an efficient exposure to the total return of a USD deposit paying the Fed Rate.”

The Federal Funds Rate is the rate of interest at which depository institutions lend funds to their equivalents, which are kept at the Federal Reserve, usually overnight. The Federal Funds Rate is considered to be the base rate for the US economy and is thus controlled by the Federal Reserve due its importance in monetary policy. The target rate has not been actively increased since 2006 and the upper bound is currently 0.25%. Recent economic improvement in the US, coupled with recent ‘hawkish’ statements from Janet Yellen, Chairwoman of the Federal Reserve, has caused analysts to predict a rate increase later this year.

The fund is expected to cross-list on the London Stock Exchange on the 10th of July with a USD-denominated share class (FEDF LN) and a GBP-denominated share class (FEDG LN). The TER of the funds will be 0.15%.

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