One of the easiest and most cost-efficient ways to diversify your long-term portfolio is to invest in ETFs replicating world indices. Today, we’ll take a look at one of them in particular: the Lyxor All-World Index ETF, which you can trade without commission on the BUX Zero app. The Lyxor All-World Index ETF replicates the MSCI World Net Total Return USD Index, which tracks stocks from 23 developed countries worldwide. The fund is uniquely identified by the International Securities Identification Number (ISIN) LU1781541179.
What’s in it?
The MSCI World Net Total Return USD Index is composed of shares in more than 1,600 different companies from the so-called developed world. The vast majority of them (around 65.3%) are from the United States, while the second-most represented country in the index is Japan, making up 7.9% of it. Great Britain accounts for around 4.3% of the total, while French, Swiss and Canadian stocks each represent around 3% of it.
Companies in the index are weighted by market capitalization, so bigger corporations have more impact on its performance. Its top constituents are Apple (accounting for around 4.2% of the total), Microsoft (3.2%), Amazon (2.7%), and Facebook (1.4%).
All the percentages above change over time with the market cap of companies in the index. You can find a complete and updated country and composition breakdown of the index here.
Let’s now take a look at the most important features of the Lyxor All-World Index ETF. The fund was launched in February 2018, which means it is quite young, but it has crossed the one-year threshold, beyond which ETFs are less at risk of being liquidated. It is managed by Lyxor International Asset Management, an investment management company held by French banking group Société Générale.
The ETF is quite large, with approximately €656 million under management. Usually, a fund is considered large when its Assets Under Management (AUM) cross the €500 million threshold. Such funds benefit from higher economies of scale, tend to be more liquid, and are less likely to be liquidated than smaller funds.
The Lyxor All-World Index ETF replicates the underlying index via optimized sampling: it holds only a selection of the most important and liquid securities in the index – those that have the greatest influence on its performance. The fund accumulates dividends, so instead of distributing them on a regular basis, it reinvests them in the same portfolio. It is also important to notice that this ETF is not hedged against currency risk. Therefore, investors bear some currency risk unless they hedge it themselves. You can read more about the topic here.
Like most large, passive funds, the Lyxor All-World Index ETF charges very low fees. Its total expense ratio (TER) is only 0.12% a year. On top of these fees charged by the fund manager, many brokers charge a commission. BUX Zero instead allows you to trade the Lyxor All-World Index ETF without a brokerage commission. Here’s how we do it.
Risk and performance
Before you invest you should always check if an investment product is a right fit for your personal risk profile, meaning how much risk you are willing to take. The Lyxor All-World Index ETF has a risk profile of 6 on a scale from 1 to 7. This means expected rewards are high, but so are the risks. The standard deviation of the fund’s monthly returns, a measure of risk, is around 28.99%. You should be aware of that before you invest.
In 2019, the fund earned a net 27.6%, which is quite close to the 27.7% earned by the underlying index. Monthly returns from inception have averaged around 5%, ranging from -13.1% to +9.9%. However, it is important to keep in mind that past performance is not indicative of future performance.
If you wish to start investing in this ETF right away, you can find it here in the app:
If, instead, you feel like you want to better understand ETFs first, then check out our ETF knowledge center.
*All figures in this article were updated on November 24, 2020.
All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.