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Lyxor UCITS compliant Exchange Traded Funds (Lyxor UCITS ETFs) referred to on this website are open ended mutual investment funds (i) established under the French law and approved by the Autorité des Marchés Financiers (the French Financial Markets Authority), or (ii) established under the Luxembourg law and approved by the Commission de Surveillance du Secteur Financier (the Luxembourg Financial Supervisory Committee). Most, if not all, of the protections provided by the UK regulatory system generally and for UK authorised funds do not apply to these exchange traded funds (ETFs). In particular, investors should note that holdings in this product will not be covered by the provisions of the Financial Services Compensation Scheme, or by any similar scheme in France.

 

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Index Replication Process

 

Lyxor UCITS ETFs follow both physical and synthetic index replication process.

 

However, most Lyxor UCITS ETFs follow synthetic replication process. This consists of entering into a derivative transaction (a ‘Performance Swap’, as defined below) with a counterparty that provides complete and effective exposure to its benchmark index. Lyxor has adopted this methodology in order to minimise tracking error, optimise transaction costs and reduce operational risks.

 

A Performance Swap is a contractual agreement which is negotiated over-the-counter (OTC) between two parties: the Lyxor UCITS ETF and its counterparty. From a risk perspective, each Performance Swap ranks equally with other senior unsecured obligations of the counterparty, such as common bonds (i.e., same rights to payments). In the Performance Swap, the counterparty of the Lyxor UCITS ETF commits to pay the Lyxor UCITS ETF a variable return based on a pre-determined benchmark index, instead of a fixed stream of income (as in bonds). At the same time, the counterparty will receive from the Lyxor UCITS ETF the performance and any related revenues generated by the basket's assets (excluding the value of the Performance Swap) held by the Lyxor UCITS ETF. Information provided on individual ETFs includes data on the basket relating to the ETF and the percentage value of the basket represented by each asset. The information is relevant to the closing values on the date given. 

 

Investment Risks

 

The Lyxor UCITS ETFs described on this website are not suitable for everyone. Investors' capital is at risk. Investors should not deal in this product unless they understand, having obtained independent professional advice where necessary, its nature, terms and conditions, and the extent of their exposure to risk. The value of the product can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates. If a fund is quoted in a different currency to the index, currency risks exist.

 

Prior to any investment in any Lyxor UCITS ETF, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us. We recommend that you consult your own independent professional advisors (including legal, tax, financial or accounting advisors, as appropriate).

 

Specific Risks

 

·         Capital at Risk. ETFs are tracking instruments: Their risk profile is similar to a direct investment in the Benchmark Index. Investors’ capital is fully at risk and investors may not get back the amount originally invested. Investments are not covered by the provisions of the Financial Services Compensation Scheme (“FSCS”), or any similar scheme.

·         Counterparty Risk. Investors may be exposed to risks resulting from the use of an OTC Swap with Societe Generale. Physical ETFs may have Counterparty Risk resulting from the use of a Securities Lending Programme.

·         Currency Risk. ETFs may be exposed to currency risk if the ETF or Benchmark Index holdings are denominated in a currency different to that of the Benchmark Index they are tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.

·         Replication Risk. ETFs are designed to replicate the performance of the Benchmark Index. Unexpected events relating to the constituents of the Benchmark Index may impact the Index provider’s ability to calculate the Benchmark Index, which may affect the ETF’s ability to replicate the Benchmark Index efficiently. This may create Tracking Error in the ETF.

·         Underlying Risk. The Benchmark Index of a Lyxor ETF may be complex and volatile. When investing in commodities, the Benchmark Index is calculated with reference to commodity futures contracts which can expose investors to risks related to the 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.

·         Liquidity Risk. On-exchange liquidity may be limited as a result of a suspension in the underlying market represented by the Benchmark Index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, Societe Generale or other Market Maker systems; or an abnormal trading situation or event.

 

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Weekly Recap (Lyxor Cross Asset Research)

Lyxor ETF research - march 7th, 2016

This document is for the exclusive use of investors acting on their own account and categorized either as "eligible counterparties" or "professional clients" within the meaning of markets in financial instruments directive 2004/39/ec. it is not directed at retail clients .

chanchal samadder Marlène Hassine Head of ETF Research
marlene.hassine@lyxor.com
+33(0)1 42 13 59

Summary and ETF inplementation

a) ECB meeting this Thursday. Markets may have now priced some of the disappointment risks. If there is no cut in deposit rate to more negative territory and additional QE is announced, it could be positive for European banks.

b) In Japan, weak data again this week on consumption and capex could prompt the Central bank and government to act. Next Bank of Japan meeting is scheduled on March 15th.

c) Inflation breakevens are still on low levels. Even oil has lost its bearing: inflation breakevens failed to revert or even to stabilize despite the stabilization in oil prices, and they have reached historically low levels in both the US and the EMU. They should rebound sharply if the recession/deflation scenario is avoided. Their downside is capped by current low valuations and central banks buying (ECB). They could be a useful hedge against Govies markets’ downside reversal.


Other useful links

Lyxor Euro STOXX Banks UCTIS ETF (BNKE FP)

Lyxor Nikkei 400 UCITS ETF (JPX4 FP)

Lyxor MTS Inflation Linked IG UCITS ETF (MTIFP)

Development

US PMI Manufacturing bouncing back
chanchal samadderSource: Bloomberg , Macrobonds, Lyxor AM

1- US data improvement: Market performance was driven by the US ISM survey bouncing to near the 50 level. Additionally, there were some signs of moderate but sustained growth in the US. The Fed Beige Book depicts a moderate and stable expansion. Consumer confidence is holding up more or less. ADP employment data came above expectations (214K for February), a good omen for official payroll numbers (expected at 195K after 151K in January).

2- Oil price stabilization: The consolidation of Oil prices continued, gaining 5% to anchor at 37$ per barrel. The ongoing discussion between OPEC and Russia to maintain production and stabilize prices is welcomed by markets. Excess free speculative positions at historical low levels are conducive to a potential oil price rally.

Oil net speculative positions at historic low levels
chanchal samadderSource: Bloomberg , Macrobonds, Lyxor AM

Inflation expectation levels have failed to revert
chanchal samadderSource: Bloomberg , Macrobonds, Lyxor AM

3- Will Central banks reassure? This week marks the start to of the Central banks meetings period. Next ECB meeting on March 10th, 15th of March for the BoJ, 16th for the Fed and 17th for the BoE. Breakeven inflations have failed so far to revert or even stabilize, which signal central banks’ loss of credibility. Markets no longer believe in the Fed’s policy normalization. The distrust extends to the ECB and BoJ. Investors doubt their ability to depreciate their currency and reflate their economies.

Product information

ETFs BBG Ticker Index Ticker TER

Lyxor EURO STOXX Banks UCITS ETF    

BNKE FP

SX7T

0.30%

Lyxor NIKKEI 400 UCITS ETF

JPX4

JPNKNTR

0.25%

Lyxor MTS Inflation Linked IG UCITS ETF

MTI FP

FMMPIIG5

0.20%


RISK Warning

It is important for potential investors to evaluate the risks described below and in the fund prospectus which can be found on 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: Investors are exposed to risks resulting from the use of an OTC Swap with Societe Generale.
In-line with UCITS guidelines, the exposure to Societe Generale cannot exceed 10% of the total fund assets. Physically replicated ETFs may have counterparty risk resulting from the use of a Securities Lending Programme.

UNDERLYING RISK: The Underlying Index of a Lyxor ETF may be complex and volatile. 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 Societe Generale.
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, Societe Generale or other market-maker systems; or an abnormal trading situation or event.

Important information

This document is for the exclusive use of investors acting on their own account and categorized either as “eligible counterparties” or “professional clients” within the meaning of Markets in Financial Instruments Directive 2004/39/EC. It is not directed at retail clients.
In Switzerland, it is directed exclusively at qualified investors. 
In accordance with MiFID as implemented in France, this publication should be treated as a marketing communication providing general investment recommendations.


This document has not been prepared in accordance with regulatory provisions designed to promote the independence of investment research.




This document is of a commercial nature. It is each investor’s responsibility to ascertain that they are authorised to subscribe, or invest into this product.


Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. Lyxor UCITS ETFs are French or Luxembourg open ended mutual investment funds respectively approved by the French Autorité des Marchés Financiers or by the Luxembourg Commission de Surveillance du Secteur Financier, and authorized for marketing of their units or shares in various European countries (the Marketing Countries) pursuant to the article 93 of the 2009/65/EC Directive.


Société Générale and Lyxor AM recommend that investors read carefully the “risk factors” section of the product’s prospectus and the “Risk and reward” section of the Key Investor Information Document (KIID). The prospectus in French for French Lyxor UCITS ETFs and in English for Luxembourg Lyxor UCITS ETFs and the KIID in the local languages of the Marketing Countries are available free of charge www.lyxoretf.com or upon request to client-services-etf@lyxor.com.


Updated composition of the product’s investment portfolio is available www.lyxoretf.com Indicative net asset value is published on the Reuters and Bloomberg pages of the products, and might also be mentioned on the websites of the stock exchanges where the product is listed.


The products are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the exchange, assuming normal market conditions and normally functioning computer systems.
Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself.


Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so.


In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them.


These products include a risk of capital loss.
The redemption value of these products may be less than the amount initially invested. In a worst case scenario, investors could sustain the loss of their entire investment.


The indexes and the trademarks used in this document are the intellectual property of index sponsors and/or its licensors. The indexes are used under license from index sponsors.
The Funds based on the indexes are in no way sponsored, endorsed, sold or promoted by index sponsors and/or its licensors and neither index sponsors nor its licensors shall have any liability with respect thereto.
The indices referred to herein (the “Index”) are not sponsored, approved or sold by Société Générale or Lyxor AM.


Société Générale and Lyxor AM shall not assume any responsibility in this respect.
The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn from sources reasonably believed to be reliable. Subject to any applicable law, Société Générale and Lyxor AM shall not assume any liability in this respect.
This document does not constitute an offer for sale of securities in the United States of America.
Units or shares of the UCITS ETF have not been and will not be registered under the United States Securities Act of 1933 (as amended) or the securities laws of any of the States of the United States.
Units or shares may not be offered, sold or delivered directly or indirectly in the United States, or to or for the account or benefit of any "US Person".
Any re-offer or resale of any units or shares in the United States or to US Persons may constitute a violation of US law.

The UCITS ETFs will not be registered under the United States Investment Company Act of 1940, as amended. Applicants for units or shares will be required to certify that they are not US Persons.
This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.
Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority).
Lyxor International Asset Management (Lyxor AM) is a French investment management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS Directive (2009/65/CE).


Notice to investors in the United Kingdom:
This material is issued in the United Kingdom by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658


Notice to investors in Switzerland:
This document is directed exclusively at qualified investors in Switzerland. Some of the UCITS ETFs presented herein are not authorized for the offer and distribution to non qualified investors in Switzerland or from Switzerland. To verify the authorisation status of the UCITS ETFs presented herein, please contact client-services-etf@lyxor.com
Regarding UCITS ETFs authorized for the offer and distribution in Switzerland or from Switzerland:
This document and the information contained therein do not constitute an issue prospectus according to articles 652a and 1156 of the Swiss Code of Obligations (“CO”) or a listing prospectus according the Listing Rules of the SIX Swiss Exchange. The products are authorized for the offer and distribution in Switzerland or from Switzerland pursuant to the Swiss Federal Act on Collective Investment Schemes (CISA).
The Swiss Financial Market Supervisory Authority FINMA has authorized Société Générale, Zurich Branch (Talacker 50, Case postale 1928, 8021 Zürich), to act as Swiss Representative and Paying Agent of the Funds in Switzerland.
The product’s documentation (prospectus, KIID, articles of association, annual and semi-annual reports) can be obtained free of charge at the Swiss representative’s office.
Regarding UCITS ETFs NOT authorized for the offer and distribution in Switzerland or from Switzerland:
The products presented herein have not been and will not be registered with, or approved by, the Swiss Financial Market Supervisory Authority FINMA (FINMA) for the distribution to non-qualified investors under the Swiss Federal Act on Collective Investment Schemes (CISA).
Therefore, the information presented herein or in the fund’s legal documentation does not necessarily comply with the information standards required by FINMA in the case of distribution of collective investment schemes to non-qualified investors.


The products must not be distributed to non-qualified investors in or from Switzerland, and may be distributed exclusively to Qualified Investors as defined in article 10 of the CISA and related provisions in the Swiss Federal Ordinance on Collective Investment Schemes (CISO) in strict compliance with applicable Swiss law and related regulations.
This document is personal and does not constitute an offer to any person.


This document must be distributed or otherwise made available in Switzerland only and exclusively to Qualified Investors, without distribution or marketing to non-qualified investors in or from Switzerland.


This document may be used only by those Qualified Investors to whom it has been handed out in connection with the offering described therein, and it may neither be distributed nor made available to other persons without the express consent of Lyxor AM or Société Générale. It may not be used in connection with any other distribution and shall in particular not be copied and/or distributed to non-qualified investors in Switzerland or in any other country.


This document, or the information contained therein, does not constitute a prospectus as such term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus pursuant to the listing rules of the SIX Swiss Exchange or any other exchange or regulated trading facility in Switzerland or a simplified prospectus, a key information for investors document, or a prospectus, as such terms are defined in the CISA.


​The product’s documentation (prospectus, KIID, articles of association, annual and semi-annual reports) can be obtained free of charge at the office of Société Générale, Zurich Branch (Talacker 50, Case postale 1928, 8021 Zürich), Swiss Representative and Paying Agent of the product in Switzerland.