Lyxor Switches €7.6bn Euro Stoxx ETF To Physical Replication

Lyxor is switching its €7.6 billion Euro Stoxx 50 fund, the largest such ETF in the world, to physical replication on Monday 2 November as it announces plans to have 50 percent of its total ETF assets physically tracking their indexes by the end of 2016.

The provider is following a Europe-wide trend in which various ETF firms are switching certain ETFs from synthetic to physical replication to improve tracking performance.

Lyxor will also make further switches like its MSCI World and Topix funds, amounting to more than half of its €25 billion ETF range in physical replication by the end of 2016.

Arnaud Llinas, head of ETF and indexing at Lyxor, said the move was to “improve performance – improve tracking error, tracking difference and liquidity”.

The Euro Stoxx 50 (ticker MSE) ETF might not be the cheapest on the market at 0.20 percent, but Llinas said there are no current plans to reduce the fee.

“We will keep certain ETFs in synthetic replication – such as emerging markets, credit, high yield, smart beta and strategy,” he added.

Lyxor started converting synthetic ETFs in 2012 with its government bond range and has already switched 26 funds in total, including mainstream equity funds tracking the CAC 40, the DAX and the IBEX 35.

The new announcement today will mean a further six ETFs are switched by the end of 2016.

Other providers which have converted funds include db X-trackers and Invesco PowerShares.