Lyxor rolls out GBP currency-hedged versions of two equity ETFs

Sep 11th, 2015 | By | Category: Equities

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Lyxor Asset Management, a Paris-based exchange-traded fund provider and subsidiary of Societe Generale, has announced the launch of pound sterling-hedged versions of two existing ETFs. Aimed primarily at UK-based investors, the new share classes offer exposure to their respective equity indices – the SG Global Quality Income Index and Euro Stoxx Index – whilst mitigating the impact of adverse currency movements against the pound.

Lyxor roll out currency-hedged versions of popular equity ETFs

Lyxor is a subsidiary of Sociate Generale.

The Lyxor SG Global Quality Income NTR GBP Monthly Hedged UCITS ETF (SGQI LN), which tracks the SG Global Quality Income Index, utilises a smart beta approach by selecting quality firms with expected high sustainable dividend levels. The theory behind the strategy is that dividends can be a major source of investment return, while firms whose financial statements are of lower quality may not be able to sustain their dividend pay-outs in the long-run.

The fund uses a multi-stage selection methodology. Stocks are screened according to their quality as determined through Piotroski’s nine quality factor model (analysing return on assets in the current year, growth in return on assets, operating cash flows, long term debt ratios, current ratios, the extent of new share issuances, gross margins, and asset turnover ratios) with only those returning positive scores in at least seven of the factors securing a place in the second screening round.

Each firm’s balance sheet strength is further analysed with a focus on profitability, operating efficiency and leverage ratios with only the highest ranking 40% making the grade. Of these stocks, only those whose expected dividend yield is above 4%, as determined by analysts’ consensus, are included in the final index.

The index currently consists of 38 constituents with major country exposures being the US (23.3%), Australia (20.0%), the UK (16.1%), Switzerland (10.1%) and Canada (9.7%). The main sector exposures are utilities (28.3%), telecommunications (22.8%), consumer discretionary (15.3%), consumer staples (11.3%) and industrials (10.6%).

The fund has a total expense ratio of 0.45%.

The Lyxor Euro Stoxx 300 GBP Monthly Hedged UCITS ETF (MFEG LN) offers exposure to eurozone equities by tracking the Euro Stoxx Net Return EURwhile offsetting currency fluctuations against the pound through a monthly hedge. The Euro Stoxx is a broad yet liquid subset (approx 300 stocks) of the Stoxx Europe 600 Index.

The index has significant exposure to France (32.3%) and Germany (27.7%) while securities listed in Spain (10.9%) and Italy (8.5%) also have a notable presence. Sector exposure is tilted towards financials (24.0%), followed by consumer discretionary (14.6%), industrials (14.2%), consumer staples (9.7%) and healthcare (9.0%).

The fund has a total expense ratio of 0.30%.

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