Lyxor, the third largest exchange-traded fund (ETF) provider in Europe, has chosen to replace the indices it uses as the basis for its global real estate ETFs, switching to the FTSE EPRA/NAREIT Developed Global Real Estate indices.
Lyxor’s decision to adopt FTSE indices for its real estate ETFs adds to FTSE’s significant European ETF business, which already includes 94 FTSE index-linked ETFs.
Francois Millet, responsible for indexing at Lyxor, said: “We have chosen to replace MSCI Real Estate Index with FTSE EPRA/NAREIT because of its high standards of investability and transparency. Further, FTSE EPRA/NAREIT indices are the most widely used global benchmarks for listed real estate and are endorsed by the leading real estate industry associations.”
These indices will support Lyxor’s planned growth within the real estate ETF market. “Choosing the right index partner is an important part of providing high quality products” added Millet.
These ETFs add to FTSE’s significant European ETF business, which already includes 94 FTSE index-linked ETFs. Globally, more than $124 billion of ETF assets are currently benchmarked to FTSE indices or scheduled to transition to FTSE indices in coming months.
Jonathan Horton, President FTSE North America, commented: “This is an important benchmark switch for FTSE and we are delighted that Lyxor has chosen to adopt our benchmark and to build on our existing relationship. FTSE is a global leader in this index segment: our EPRA/NAREIT index series is the pre-eminent real estate benchmark across the world.
Lyxor already offers a number of ETFs based on FTSE indices including FTSE 100, FTSE 250, FTSE MIB, FTSE RAFI, FTSE JSE and FTSE Kuwait. It also offers other real estate FTSE EPRA/NAREIT ETFs including US, Europe, Asia ex Japan and Developed Europe.
The FTSE EPRA/NAREIT (European Public Real Estate Association/ National Association of Real Estate Investment Trusts) Developed Index is designed to track the performance of listed real estate companies and REITS worldwide.
The index incorporates Real Estate Investment Trusts (REITs) and Real Estate Holding and Development Companies as categorised in accordance with the Industry Classification Benchmark (ICB), the global standard for industry sector analysis.
The announcement from Lyxor comes at a time when global property equity ETFs are seeing a revival in interest among investors. The search for yield has rendered prime real estate attractive in countries such as Germany, the UK and the Nordic areas, particularly relative to other asset classes, such as government bonds.
After a challenging 2011, global real estate indices notched up positive returns in both the first and second quarters of the year, one of the few major sectors to do so, according to S&P Capital IQ Fund Research. The resilience in the second quarter was principally propelled by developed Asia and especially China.