Lyxor and db X-trackers Shake Things Up

Two of the largest ETF providers in the industry have begun offering physical ETFs, marking a departure from their roots

Lee Davidson 21 November, 2012 | 9:55AM

The largest synthetic ETF providers in Europe, Lyxor and db X-trackers, have announced they are venturing into the physical ETF market. This comes as the two companies face increasing competitive pressures and net outflows over the past year.

Historically, Lyxor and db X-trackers offered synthetic ETF products, which tracked market indices using swaps. This method of ETF construction opens investors up to counterparty default risk. Meanwhile, physical ETFs buy the actual constituents of their underlying index in order to track the index, instead of using swaps and derivatives.

While Lyxor and db X-trackers' existing ETF line-ups consist primarily of synthetic ETFs, their rival and market leader, iShares, provides an ETF line-up of predominantly physical ETFs.

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About Author

Lee Davidson

Lee Davidson  is an ETF analyst with Morningstar Europe.

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