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Alpha/Beta Allocator: US Equities

Why pay more for less?

The industry

AUM & flows

Active

Passive

“The data is clear – passive is now the default choice”

Marlène Hassine Konqui,Head of ETF Research

AUM & flows

The active managers

Performance vs. benchmarks

Europe is one of the best regional destinations for alpha seekers...

AUM & flows

...but very few managers beat the conventional broad benchmarks in the US whether over the short,or long, term.*

YTD

2017

10 year average

Hit: when YTD results are >50% or >10yr figure

Miss: when YTD results are <33% or <10yr figure

charts

The costs

How active & passive compare

The typical active equity fund is c.4x more expensive than the typical ETF – why pay more for less?

Why Lyxor for US equities?

14 routes

into US equities

14+ routes

Lowest cost

core US equity exposures in Europe

0.04%

Best performing:

S&P 500 ETF 

Most efficient

Oldest:

NASDAQ 100 & DJIA ETFs

Oldest

Source: Lyxor International Asset Management.Performance Data over 5 years as at 23/04/2018. All other statements, including costs refer to European ETF market and were correct as at 5 July 2018. Past performance is no guide to future returns.

*Source: Morningstar and Bloomberg data from 31/12/2007 to 29/06/2018. 10 yr data as at 31/12/2017 50% and 33% represent the best and worst results after we divided the universe we cover into 3 sub-groups. Between those limits, “hits” and “misses” are set comparing the current quarter’s result vs. the long-term averages.Performance data calculated to end August 2018 vs. top 5 ETFs on this index.
Past performance is no guide to future returns.

lyxor etf logo

Conflicts of interest

This research contains the views, opinions andrecommendations of Lyxor International Asset Management(“LIAM”) Cross Asset and ETF research analysts and/orstrategists. To the extent that this research contains tradeideas based on macro views of economic market conditionsor relative value, it may differ from the fundamental CrossAsset and ETF Research opinions and recommendationscontained in Cross Asset and ETF Research sector orcompany research reports and from the views and opinionsof other departments of LIAM and its affiliates. LyxorCross Asset and ETF research analysts and/or strategistsroutinely consult with LIAM sales and portfolio management

personnel regarding market information including, but notlimited to, pricing, spread levels and trading activity ofETFs tracking equity, fixed income and commodity indices.Trading desks may trade, or have traded, as principal onthe basis of the research analyst(s) views and reports. Lyxorhas mandatory research policies and procedures that arereasonably designed to (i) ensure that purported facts inresearch reports are based on reliable information and (ii)to prevent improper selective or tiered dissemination ofresearch reports. In addition, research analysts receivecompensation based, in part, on the quality and accuracyof their analysis, client feedback, competitive factors andLIAM’s total revenues including revenues from managementfees and investment advisory fees and distribution fees.

It is important for potential investors to evaluate the general risks described below and in the fund prospectus on our website www.lyxoretf.com

Capital at risk

ETFs are tracking instruments: Their risk profile is similar to a direct investment in the Underlying index. Investors’ capital is fully at risk and investors may not get back the amount originally invested.

Replication risk

The fund objectives might not be reached due to unexpected events on the underlying markets which will impact the index calculation and the efficient fund replication.

Counterparty risk

With synthetic ETFs, investors are exposed to risks resulting from the use of an OTC swap with Société Générale. In-line with UCITS guidelines, the exposure to Société Générale cannot exceed 10% of the total fund assets. Physically replicated ETFs may have counterparty risk if they use a securities lending programme.

Concentration risk

Smart Beta ETFs select stocks or bonds for their portfolio from the original benchmark index. Where selection rules are extensive, it can lead to a more

concentrated portfolio where risk is spread over fewer stocks than the original benchmark.

Underlying risk

The Underlying index of a Lyxor ETF may be complex and volatile. For example, when investing in commodities, the Underlying index is calculated with reference to commodity futures contracts exposing the investor to a liquidity risk linked to costs such as cost of carry and transportation. ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.

Currency risk

ETFs may be exposed to currency risk if the ETF is denominated in a currency different to that of the Underlying index they are tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.

Liquidity risk

Liquidity is provided by registered market-makers on the respective stock exchange where the ETF is listed, including Société Générale. On exchange, liquidity may be limited as a result of a suspension in the underlying market represented by the Underlying index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, or other market-maker systems; or an abnormal trading situation or event.

This communication is exclusively directed and availableto Institutional Investors as defined by the 2004/39/ECDirective on markets in financial instruments acting for theirown account and categorised as eligible counterparties orprofessional clients. This communication is not directed atretail clients. 

This document is issued in the UK by Lyxor AssetManagement UK LLP, which is authorized and regulated bythe Financial Conduct Authority in the UK under RegistrationNumber 435658.

 Some of the funds described in this brochure are investmentcompanies with Variable Capital (SICAV) incorporated underLuxembourg Law, listed on the official list of Undertakingsfor Collective Investment, authorised under Part I of theLuxembourg Law of 17th December 2010 (the “2010 Law”)on Undertakings for Collective Investment in accordancewith provisions of the Directive 2009/65/EC (the “2009Directive”) and subject to the supervision of the Commissionde Surveillance du Secteur Financier (CSSF). 

These funds are sub-funds of either Multi Units Luxembourgor Lyxor Index Fund and have been approved by the CSSF.Alternatively, some of the funds described in this documentare sub-funds of Multi Units France a French SICAVincorporated under the French Law and approved by theFrench Autorité des marchés financiers. Each fund complieswith the UCITS Directive (2009/65/CE), and has beenapproved by the French Autorité des marchés financiers.Société Générale and Lyxor AM recommend that investorsread carefully the “risk factors” section of the product’sprospectus and Key Investor Information Document (KIID).The prospectus and the KIID are available in French on thewebsite of the AMF (www.amf-france.org). The prospectusin English and the KIID in the relevant local language (forall the countries referred to, in this document as a countryin which a public offer of the product is authorised) areavailable free of charge on lyxoretf.com or upon request toclient-services-etf@lyxor.com

 The products are the object of market-making contracts, thepurpose of which is to ensure the liquidity of the productson NYSE Euronext Paris, Deutsche Boerse (Xetra) andthe London Stock Exchange, assuming normal marketconditions and normally functioning computer systems.Units of a specific UCITS ETF managed by an assetmanager and purchased on the secondary market cannotusually be sold directly back to the asset manager itself.Investors must buy and sell units on a secondary marketwith the assistance of an intermediary (e.g. a stockbroker)and may incur fees for doing so. In addition, investors maypay more than the current net asset value when buying unitsand may receive less than the current net asset value whenselling them. 

Updated composition of the product’s investment portfoliois available on www. lyxoretf.com. In addition, the indicativenet asset value is published on the Reuters and Bloombergpages of the product, and might also be mentioned onthe websites of the stock exchanges where the productis listed. Prior to investing in the product, investors shouldseek independent financial, tax, accounting and legal

advice. It is each investor’s responsibility to ascertain thatit is authorised to subscribe, or invest into this product.This document together with the prospectus and/or moregenerally any information or documents with respect to orin connection with the Fund does not constitute an offerfor sale or solicitation of an offer for sale in any jurisdiction(i) in which such offer or solicitation is not authorized, (ii) inwhich the person making such offer or solicitation is notqualified to do so, or (iii) to any person to whom it is unlawfulto make such offer or solicitation. In addition, the sharesare not registered under the U.S Securities Act of 1933 andmay not be directly or indirectly offered or sold in the UnitedStates (including its territories or possessions) or to or forthe benefit of a U.S Person (being a “United State Person”within the meaning of Regulation S under the SecuritiesAct of 1933 of the United States, as amended, and/or anyperson not included in the definition of “Non-United StatesPerson” within the meaning of Section 4.7 (a) (1) (iv) of therules of the U.S. Commodity Futures Trading Commission).No U.S federal or state securities commission has reviewedor approved this document and more generally anydocuments with respect to or in connection with the fund.Any representationto the contrary is a criminal offence.

 This document is of a commercial nature and not of aregulatory nature. This document does not constitutean offer, or an invitation to make an offer, from SociétéGénérale, Lyxor Asset Management (together with itsaffiliates, Lyxor AM) or any of their respective subsidiaries topurchase or sell the product referred to herein. 

These funds include a risk of capital loss. The redemptionvalue of this fund may be less than the amount initiallyinvested. The value of this fund can go down as well as upand the return upon the investment will therefore necessarilybe variable. In a worst case scenario, investors couldsustain the loss of their entire investment.

 This document is confidential and may be neithercommunicated to any third party (with the exception ofexternal advisors on the condition that they themselvesrespect this confidentiality undertaking) nor copied in wholeor in part, without the prior written consent of Lyxor AMor Société Générale. The obtaining of the tax advantagesor treatments defined in this document (as the case maybe) depends on each investor’s particular tax status, thejurisdiction from which it invests as well as applicablelaws. This tax treatment can be modified at any time.We recommend to investors who wish to obtain furtherinformation on their tax status that they seek assistancefrom their tax advisor. The attention of the investor is drawnto the fact that the net asset value stated in this document(as the case may be) cannot be used as a basis forsubscriptions and/or redemptions. The market informationdisplayed in this document is based on data at a givenmoment and may change from time to time.

 Authorizations: Lyxor International Asset Management(Lyxor AM) is a French management company authorized bythe Autorité des marchés financiers and placed under theregulations of the UCITS (2009/65/EC) and AIFM (2011/61/EU) Directives. Société Générale is a French credit institution(bank) authorised by the Autorité de contrôle prudentiel etde résolution (the French Prudential Control Authority.

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