Lyxor aims for new standards with ETF charter

Lyxor has created an ETF Quality Charter as a commitment to its clients following months of scrutiny of ETFs.

"We want to set a new standard for ETF investors," says Simon Klein, Lyxor head of ETFs Europe. "There are six quality indicators so clients can really trust the product and there is a lot of commitment from us."

The six indicators are: asset management quality, index tracking, transparency, counterparty risk, primary market and secondary market.

The decision to publish the charter comes after months of examination of the ETF market, with particular focus falling on the synthetic (or swap-based) structure used by Lyxor.

"People have been focusing on the structure of ETFs; with this charter we are responding with our commitment and showing that investors don't need to worry," says Klein.

He adds that although Lyxor's ETFs are swap-based, they also hold physical assets (this is the unfunded swap structure) and it does not engage in securities lending.

He highlights the fact that some of its commitments go beyond what the regulations neccessitate. For example, it has a daily counterparty risk target of zero, below the 10% required by Ucits.

Lyxor publishes all the details of its holdings and counterparties on its website, which is updated on a daily basis; this is becoming the industry standard, with many leading providers doing the same.

Its declarations come shortly after BlackRock called for greater transparency in the ETF market. Klein says he expects more providers to make their own charters but an industry-wide charter is unlikely. "We tried to set up a European association, which would have covered topics like this. That association didn't happen and we can't wait for one to come, we need to show clients now."

He adds that if other providers issue their own charters, investors will be able to compare them, "then you can see how strong other charters are and it's up to the clients to decide".