LGIM’s ETF head Li on how the firm is harnessing disruptive technology

Disruptive technology and how to harness it through the ETF wrapper remains a crucial area of focus for Legal & General Investment Management’s head of ETFs Howie Li.

This is a continuation on from his days at Canvas where he headed-up the platform owned by ETF Securities, which was subsequently bought by LGIM in November 2017 as the firm looked to enter the ETF space.

Thematic ETFs have grown substantially from a low level in recent years with the number of products listed in Europe quadrupling to 16 in 2018 while assets under management total £1.8bn, up from £158m in 2014.

Since launching in 2013, Canvas has been at the forefront of thematic innovation and under the LGIM umbrella, now offer a range of themes to investors including cyber security, eCommerce logistics, robotics and automation, battery value-chain and pharmaceutical breakthrough. LGIM currently has $1.7bn assets under management in thematic ETFs.

“All sectors and businesses are being transformed because of disruptive technologies,” Li (pictured) commented. “Some businesses are embracing this change and some are being left behind.

“We want to identify the opportunities caused by technological disruption. The most exciting aspect for investors is how the deployment of technology is going to change business models and help firms grow at a much faster rate than they used to.”

In order to gain an edge over competitors, Li said the firm works with experts in the respective themes, which helps them identify the opportunities and construct the index.

“From a macro perspective, this helps us navigate the new world and enables us to understand how it is being shaped.”

One area LGIM is not launching a product at the moment is blockchain. When constructing the index, Li said it is crucial the constituents are as close to the disruptive technology as possible.

This is currently not the case with blockchain, Li said, as the majority of opportunities are in the private space which cannot be captured in an ETF.

“Until more companies are listed or can demonstrate they have a strong amount of revenue coming from blockchain or investing the vast majority of their research and development costs into blockchain, we will struggle to produce an ETF which fits with the way we create investments,” he explained.

“It is a space to watch but we need to see more publicly accessible opportunities,” he continued. “We always need to make sure we are well educated by dedicated experts in the space and we can identify the investment opportunities which have a high purity or connection to that theme.”

To hear more from Howie Li sign up to ETF Stream’s Big Call: Tech Funds event on 12 June. Click here for more details.

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