Industry Updates

Lyxor gives China ETF ESG makeover in latest index switch

Investors can exit the ETF without a fee until 8 November

Theo Andrew

Chinese dragon China

Lyxor has swapped the index on yet another one of its ETFs to one that tracks environmental, social and governance (ESG) metrics as the rush to badge existing products sustainably continues.

Effective 11 October, the €280m Lyxor China Enterprise UCITS ETF (ASIL) has seen its index changed from the Hang Seng China Enterprises Net Total Return index to the MSCI China Select ESG Rating and Trend Leaders Net Total Return index.

As a result, ASIL is now known as the Lyxor MSCI China ESG Leaders Extra UCITS ETF under the same ticker. The total expense ratio (TER) will remain at 0.65%.

The index switch marks a substantial change to the underlying holdings within ASIL which has seen its holding in Tencent and Alibaba almost double overnight to 13.4% and 16.6%, respectively.

Lyxor said the ETF will bear the costs associated with the changes which “could have a negative impact on the net asset value of the sub-fund”.

Shareholders who do not agree with the changes can redeem their shares without a fee until 8 November, it added.

In a market update, Lyxor said: “The aim of this change is to provide the shareholders with an exposure to the new index that grants an exposure to large and mid-cap stocks, across the Chinese economy, issued by companies with robust ESG ratings relative to their sector peers and which experienced a yearly improvement in these ESG ratings.”

The move is part of a growing trend by issuers to rebrand their existing suite of ETFs into ESG-related products, normally via an index switch, that can sometimes have a profound impact on the underlying holdings of the ETF.

Last week, Lyxor swapped the index on its $942m Lyxor MSCI USA UCITS ETF (USAL), renaming it the Lyxor MSCI USA ESG UCITS ETF and slashing the TER from 0.25% to 0.09% in the process.

While some switches are as simple as placing an ESG screen on the existing parent index, others change the underlying index completely.

Earlier this week, DWS delayed the index switching on its £42m Xtrackers FTSE All-World ex UK UCITS ETF (XDEX) “to ensure a smooth transition”.

XDEX will undergo a complete overhaul and will go from tracking the FTSE All-World Ex UK index to the MSCI EM Select ESG Screened index, binning its 58.5% weighting the US and upping its exposure to China from 4% to 34.2%.

In September, the firm also switched the index of its Europe mid-cap ETF, renaming it Xtrackers MSCI Europe ESG Screened UCITS ETF (XUEM), while BNP Paribas Asset Management did the same to its French equity ETF, now known as the BNP Paribas Easy CAC 40 ESG UCITS ETF (E40). 

In August, DWS added an ESG filter to nine of its Europe sector ETFs along with swapping index providers from STOXX to MSCI.

Featured in this article

Logo for DWSLogo for LyxorLogo for BNP Paribas Asset Management