Industry Updates

LGIM switches replication strategy on Paris-Aligned EM ETF

RIEM will track all securities in the index

Lauren Gibbons


Legal & General Investment Management (LGIM) is set to start fully replicating its $90.5m Paris-Aligned Benchmark (PAB) emerging market ETF.

The change means that the L&G Emerging Markets ESG Exclusions Paris Aligned UCITS ETF (RIEM) will switch to tracking all the securities that make up the index.

Currently, RIEM follows a non-replicating strategy or ‘optimised’ approach, aiming to mirror the index as closely as possible without tracking the entire benchmark.

LGIM said the changes will take place “on or around” 18 June.

Under an optimised approach, the ETFs adhere to the 5/10/40 rule for UCITS which means that no single asset can be more than 10% of the fund's total assets.

In addition, holdings of more than 5% cannot add up to exceed 40% of the ETF's assets.

However, after the replication change, RIEM will adhere to the 20/35 rule, meaning it can have up to 20% invested in a single stock.

This limit can then be raised to 35% during exceptional circumstances such as when one issuer exhibits dominance within their respective market.

Elsewhere, LGIM has recorded $2.5bn outflows in 2024, with investors redeeming $1.7bn from the L&G US ESG Exclusions Paris Aligned UCITS ETF alone.

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