Lyxor Launches European Multi-Factor ETF

Lyxor has joined the fray of smart beta providers who are now offering investors exposure to several different risk factors within one ETF wrapper, called “multi factor”.

The €10.5 million swap-backed Lyxor J.P. Morgan Multi-Factor Europe Index UCITS ETF (LYX5) listed in Germany on 11 October and costs 0.4 percent per year.

It tracks an index of  172 European companies that are skewed towards five risk factors: low size (companies with low market capitalisation), value (based on price-to-earnings ratio, price-to-book ratio and cash flow), quality (return on equity, debt ratio and net profit margin), low beta and momentum (companies with high positive volatility).

The top sector in the fund is financials at over 25 percent, followed by materials and consumer discretionary stocks.

There are six competing multi-factor ETFs listed in Europe and only one of them focuses specifically on European companies like the Lyxor fund.

iShares launched three multi-factor ETFs in September, focusing on global, U.S. and European stocks. The iShares FactorSelect MSCI Europe UCITS ETF (IFSE) tracks 114 stocks and costs 0.45 percent. The iShares’ ETFs track four factors: value, quality, momentum and size.

The first multi-factor ETFs to launch in Europe were in 2014 and are based on indexes from ERI Scientific Beta, all with the same cost of 0.4 percent. They are the Morgan Stanley Scientific Beta Global Equity Factors UCITS ETF (GEF), the Morgan Stanley Scientific Beta US Equity Factors UCITS ETF (USEF) and the Amundi Global Equity Allocation Scientific Smart Multi Beta UCITS ETF (SMRT).