Lyxor expands suite of London-listed commodity ETFs

Mar 8th, 2012 | By | Category: Commodities

Lyxor ETFs has launched four new commodity ETFs on the London Stock Exchange, including two smart or enhanced beta funds and a pair of long/short broad-based exposure funds.

Lyxor expands suite of London-listed commodity ETFs

Lyxor has expanded its suite of London-listed commodity ETFs with the launch of four new funds, including two smart beta strategies.

The new the Lyxor ETF Broad Commodities Optimix TR (OPTM) and Lyxor ETF Broad Commodities Momentum (MOMT) ETFs track rules-based, enhanced beta strategies which aim to optimise roll yields across contracts and seasons or to generate absolute returns from a universe of 24 commodities, respectively.

The Lyxor ETF Broad Commodities Momentum fund (TER 0.35%) tracks the SGI Commodities Curve Momentum Beta+ Index, an index which aims to generate absolute returns in commodities through a systematic long/short strategy based on pure quantitative signals. The index’s strategy ranks commodities according to a technical trend indicator which is based on the shape of the futures curve: the larger the backwardation the greater the weight in the index.

The index tends to be long the most backwardated (or least contangoed) commodities and short those contangoed (or least backwardated). The strategy also applies a price filter to reduce the potential impact of massive curve swings and a volatility control mechanism.

The Lyxor ETF Broad Commodities Optimix TR fund (TER 0.35%) tracks the SGI Commodities Optimix TR Index, an index which aims to generate returns from investing in a selection of commodities futures contracts through a systematic long-only strategy based on a predefined rolling methodology, and a money market instrument.

The index rolling methodology selects for each of the 24 commodities which comprise the index, the best contract to roll (i.e. the one that generates the most interesting roll yield) taking into account such factors as the shape of the curve, the seasonality, or historical patterns. The methodology also aims to optimise roll timing in order to ensure liquidity and mitigate market impact. Each quarter, the position in the underlying contracts will be reviewed in order to assign an equal weight to each of the three sectors (Agriculture & Live Stocks, Energy, and Metals).

For investors looking for more straight forward long or short exposure, Lyxor has added two S&P GSCI linked ETFs. The Lyxor ETF S&P GSCI Aggregate 3 Month Forward (GSAU), and Lyxor ETF S&P GSCI Aggregate Inverse 1 Month Forward (GSAI) provide either long or short exposure to a broad aggregate basket of 24 commodity futures. By accessing such a variety of commodities in one fund, investors can take a view on the whole commodity sector in just one simple trade. The long fund has a TER of 0.35%, while the inverse funds costs 0.40%.

All four of the new ETFs are UCITS compliant, adhering to both the diversification rules and credit risk limits under UCITS IV. However, Lyxor goes beyond UCITS’ rules and manages the fund’s exposure to the swap issuer every day, targeting 0% counterparty risk for all its ETFs.

Lyxor also enforces its own strict guidelines with regards to asset quality, which means that only highly-capitalised, liquid stocks will be used as assets held by the funds. Plus, in order to eradicate any hidden counterparty risk, Lyxor ETFs do not engage in any securities lending.

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