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LGIM expands thematic ETF range and invests in disruptive tech and innovation

News Team, 03/07/2019

Legal & General Investment Management (LGIM) has launched three new thematic exchanged trade funds (ETF) designed to maximise investment opportunities created by innovations in artificial intelligence (AI), healthcare and clean water.

The L&G Artificial Intelligence UCITS ETF will seek returns from the global market for AI solutions and applications. It will include companies building AI engine and platform solutions, as well as those utilising AI capabilities for the purpose of digital transformation. LGIM have been motivated to launch the fund by projections that AI technologies could increase global GDP by $15.7 trillion by 2030, while revenues are projected to grow from $16.2 billion in 2018 to $31.2 billion in 2025.

Meanwhile, its new L&G Healthcare Breakthrough UCITS ETF will consist of companies leading in the digitalisation of the healthcare supply chain, advances in healthcare robotics and next-generation diagnostic tools. It has been designed to maximise opportunities in healthcare, which accounted for 18 percent of US GDP in 2017 and is anticipated to be an $8.7 trillion global industry by 2020.

Investors in the L&G Clean Water UCITS ETF will look for returns from an index that is focused on companies integral to the world’s management of water, including companies engaged in water production, processing and the provision of other related services.

All three ETFs are listed on the London Stock Exchange, while LGIM hope that the new funds will boost existing thematic and core ETFs, which includes the $904 million L&G Cyber Security UCITS ETF and $919 million L&G ROBO Global Robotics and Automation UCITS ETF.

The intention of the funds is to provide investors with diversification across geographies, market capitalisation and sub sectors. Each of them has been designed to invest in markets with potential for rapid growth due to technological advancements, providing investors with access to companies creating solutions to longstanding challenges.

Consequently, LGIM has developed its own indices through active research into these markets with industry experts at ROBO Global and Global Water Intelligence. Its active index construction mean that the stocks within these thematic ETFs both cut across traditional industry classifications and also disrupt the incumbent large-caps that typically dominate conventional sector-based indices.

Furthermore, the funds use full physical replication to provide investors direct and pure exposure to the theme. This bottom-up and concentrated approach helps investors to minimise overlap and over-exposure across their existing portfolios. Across LGIM’s five pre-existing thematic ETFs, the average overlap in holdings with the MSCI World index is just 1.92 percent and the average weighting to small and mid-caps is 56 percent.

Howie Li, Head of ETFs at LGIM, was positive about the developments, believing that the bespoke indices would potentially attract investors.

He said: “All sectors and businesses are being transformed by disruptive technology and we’re seeing increasing demand from investors looking to access these themes in a cost-efficient way. These new funds offer investors the opportunity to hold companies directly benefiting from these themes, with bespoke indices constructed around active selection and research and implemented in a systematic and rules-based way.”

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