Expansion of commodities ETF range offers investors diversified exposure to the commodity futures market through a multi-factor strategy
8 Jul 2021
Legal & General Investment Management (LGIM) has today launched the L&G Multi-Strategy Enhanced Commodities UCITS ETF (‘the Fund’), offering investors diversified exposure to the commodities futures market, as they seek to manage inflation and participate in investment opportunities across different commodities throughout the market cycle.
The Fund will seek to track the performance of the Barclays Backwardation Tilt Multi-Strategy Capped Total Return Index (‘the Index’). The Index is comprised of all commodities in the Bloomberg Commodity Index and provides a return equivalent to a fully collateralised investment in a diversified portfolio of commodity futures across the following five commodity groups: Energy, Precious Metals, Industrial Metals, Livestock and Agriculture.
The Fund employs a multi-factor strategy, applying the following enhancements to provide optimal exposure to specific commodities by rolling the respective futures contracts dynamically:
The Fund is initially being listed on the London Stock Exchange, targeting professional investors who are evaluating the strategic role of commodity futures investments as part of a multi-asset portfolio. It builds on LGIM’s existing Commodities ETF range which includes the L&G All Commodities UCITS ETF and the L&G Longer Dated All Commodities UCITS ETF.
LGIM’s Index team has a wealth of experience in index funds and over the last 25 years has grown into one of the largest global providers. Backtesting of the index from 2011 onwards*, evidences the enhanced strategies applied to each commodity group in this fund and the backwardation tilt multi-strategy index can help provide outperformance against core commodity benchmarks.
This launch builds on the demand seen across LGIM’s commodities ETF range for investment solutions with low correlation to other asset classes, including traditional stocks and bonds, allowing clients to tap into the growth opportunities in the real economy as the global recovery gathers pace.
Howie Li, Head of ETFs at LGIM: "This launch reflects LGIM’s continued commitment to active index design and is another example of innovation where investment strategies can be constructed to focus on the potential for stronger returns, rather than traditional benchmark returns.
With track record of one of our other commodities ETFs, we’ve proven that longer dated futures help with long term performance and drawdown management, by reducing the volatility caused by near-term futures investments. Through risk mitigation and a deep understanding of the return drivers in the commodities markets, we’re aiming to deliver greater value for clients. This investment strategy considers the risks and opportunities associated with the seasonality of certain commodities investments, roll yield enhancements in managing futures and the momentum effect of certain agricultural investments."
Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with over £1.2 trillion in total assets under management* of which 39% is international. We have a unique and highly synergistic business model, which continues to drive strong returns. Legal & General provides powerful asset origination and management capabilities directly to clients, which also underpin our leading retirement and protection solutions. We are a leading international player in Pension Risk Transfer, in UK and US life insurance, and in UK workplace pensions and retirement income. Our purpose is to improve the lives of our customers and create value for our shareholders. Through inclusive capitalism, we are investing in long-term assets, such as real estate and infrastructure, that can help build a better society for the future.
*as at HY 2023
Legal & General Investment Management
LGIM is one of Europe’s largest asset managers and a major global investor, with total assets under management of £1.16 trillion1 ($1.47tn, €1.35tn, CHF 1.31tn). We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.
For more than 50 years, we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property, and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.
1 Data as at 30 June 2023. Data combines assets under management by LGIM in the UK, LGIMA in the US and LGIM Asia in Hong Kong.
Assets under management include securities and derivatives positions
*as at HY 2023