Lyxor Converts JPX Nikkei 400 ETF To Physical

Lyxor has switched its JPX-Nikkei 400 UCITS ETF to physical replication, continuing a trend of providers in Europe who are moving away from a swap-backed structure.

The French ETF provider announced that the change was made on 16 July and this means that the fund will now directly invest in the equities of the underlying market, as opposed to using derivatives to replicate the index.

Arnaud Llinas, global head of ETFs and indexing at Lyxor, said he wanted to ensure that clients always receive “the best possible performance” for a given index.

“In the case of our JPX-Nikkei 400 UCITS ETF, we believe a direct replication approach will offer the most efficient tracking,” he said.

This ETF is the largest in the European market with $793.8 (€722.1) million in assets under management, and has annual fees of 0.25 percent.

Source launched the first ETF in Europe to track this index in September 2014, with annual fees of 0.20 percent including a swap fee. There are now five ETFs tracking the JPX Nikkei 400, and three of them – from Lyxor, db X-trackers and iShares – are physically replicated.