Northern Trust Enters European ETF Market

The firm launched two smart-beta ESG strategies for its debut in a new market. 

Reviewed by: Tom Eckett
Edited by: Tom Eckett

[Editor’s note: This article originally appeared on ETF Stream]

LondonNorthern Trust Asset Management has become the latest asset manager to enter the €1.1 trillion European exchange-traded fund (ETF) issuer.

The Chicago-based ETF issuer has launched two smart beta ESG strategies that incorporate climate factors, an area of the market that is currently experiencing rapid growth.

Last year, ESG ETFs in Europe saw more inflows than their non-ESG ETF counterparts with a record €45.5 billion new assets versus €43.8 billion, according to data from Lyxor.

The FlexShares Developed Markets Low Volatility Climate ESG UCITS ETF (QVFD) and the FlexShares Developed Markets High Dividend Climate ESG UCITS ETF (QDFD) are listed on the London Stock Exchange and Euronext Amsterdam with total expense ratios (TERs) of 0.25% and 0.29%, respectively.

Northern Trust has partnered with index provider Stoxx to produce custom-built indices that tilt towards companies better prepared for the transition to a low carbon economy.

QVFD tracks the iSTOXX Northern Trust Developed Markets Low Volatility Climate ESG index while QDFD tracks the iSTOXX Northern Trust Developed Markets High Dividend Climate ESG index.

The indices start with the STOXX Global 1800 as its defined investment universe before excluding companies involved in controversial weapons, tobacco or thermal coal.

The two ETFs also implement a quality factor model that eliminates the lowest quintile of quality stocks within each sector and region.

Finally, they are weighted based on their respective low volatility or high dividend scores and their carbon footprint impact.

The push will be led by Marie Dzanis, head of EMEA at Northern Trust, who joined the firm from BlackRock in 2011.

Dzanis commented: "Actively designed with the transparency of indexing, these two ETFs are built specifically to fit within EMEA investors’ evolving needs to help manage portfolio volatility and deliver income in a low yield environment while doing so with a focus on quality.”

Tom Eckett is the editor of ETF Stream, joining as a senior writer in March 2019. He started his career at Investment Week in August 2016 as an asset management correspondent covering ETFs.