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Lyxor’s green bond ETF tops €525m as assets almost treble in 2020

Lyxor’s pan-European-listed green bond ETF, the Lyxor Green Bond (DR) UCITS ETF (CLIM FP), has cruised to more than €500 million in assets under management thanks to approximately €330m of new money allocated to the fund so far this year.
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Lyxor’s pan-European-listed green bond ETF, the Lyxor Green Bond (DR) UCITS ETF, has cruised to more than €500 million in assets under management thanks to approximately €330m of new money allocated to the fund so far this year.

Lyxor’s green bond ETF tops €525m as assets almost treble in 2020

Lyxor’s green bond ETF has surpassed €500m in assets on the back of robust and accelerating investor demand.

The fund appears to be on track to chalk up a clean sweep of monthly inflows in 2020 – twelve months of back-to-back positive flows.

At its launch in 2017, the fund was the world’s first ETF to offer dedicated exposure to green bonds.

In the ensuing years, it has seen its assets swell in synchronization with the growth of the underlying green bond market, which has accelerated this year.

The fund debuted on Euronext Paris (CLIM FP) but has since been cross-listed to multiple exchanges around Europe including the London Stock Exchange (CLIM LN / CLMU LN), Xetra (KLMT GY), and Borsa Italiana (CLIM IM), among others.

It is linked to the Solactive Green Bond EUR USD IG Index, an index co-developed by Lyxor in partnership with Solactive and the Climate Bonds Initiative.

The index universe comprises all USD and EUR-denominated investment-grade bonds that have been defined as green bonds by the Climate Bond Initiative. Floating-rate notes, inflation-linked bonds, convertible bonds, and municipal bonds are excluded from selection.

To be included in the index, bonds must have at least €300m or $300m outstanding for bonds denominated in euros or US dollars, respectively, with remaining time to maturity of at least 12 months. Index components are weighted by market value outstanding with corporate issuers and government issuers capped at 5% and 10% respectively.

Green bonds are essentially bonds that are issued primarily to finance projects aimed at combating climate change, with typical investments focused on the clean energy, green buildings, and clean transportation industries. Recent issues include Société du Grand Paris, Iberdrola, the Dutch State, E.ON, Verizon, Hong-Kong MTR.

According to the Climate Bonds Initiative, the market for green bonds reached a new record in Q3 2020, with issuance peaking at $73bn, the highest volume in any third quarter period since market inception in 2007 and the second-highest amount on record in any single quarter. Cumulative issuance volume since inception reached $954bn and is expected to breach the $1 trillion milestone in Q4.

The market is benefitting from the convergence of several market drivers: rising investor demand for green assets, an increasing number of companies looking to transform their operational and product model to reduce carbon emissions and achieve carbon neutrality by 2050, as well as a new regulatory framework and a host of stimulus measures designed to stem the Covid-19-induced global recession such as the EU’s Next Generation Recovery Plan – all of which make for an environment conducive to increased green bond issuance.

Reflecting the increasing expansion of this market, the number of green bonds tracked by the index has quadrupled to 440, making it an increasingly diversified fund.

François Millet, Head of ETF Strategy, ESG and Innovation at Lyxor Asset Management, commented: “We are proud that our pioneering Green Bond ETF has reached this important milestone and we are convinced of the power of indices and ETFs to reallocate capital at scale towards a carbon-neutral economy. This conviction also led us to launch this year the first ecosystem of climate ETFs tracking the EU’s Climate-Transition and Paris-Aligned benchmarks, designed to meet the Paris Agreement goals”.

Manuel Adamini, Senior Advisor at Climate Bonds Initiative, added: “We congratulate our long-time Climate Bonds partner Lyxor Asset Management for this important achievement. This is exactly what we need on a global scale, reorienting capital towards climate-relevant projects and assets to achieve Paris Agreement objectives. Passive products pick up a powerful trend in investment management, the ongoing demand for green opportunities, channeling capital away from a fossil-fuel-based past into a low carbon and sustainable future, and – most importantly – doing so at minimum cost and friction for investors. The growth that Lyxor is experiencing is a reflection of this momentum gathering in the market.”

The fund has a total expense ratio of 0.25%.

Lyxor Green Bond (DR) UCITS ETF

Lyxor Green Bond (DR) UCITS ETF

The post Lyxor’s green bond ETF tops €525m as assets almost treble in 2020 first appeared on ETF Strategy.

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Spread & Containment

Step Back to the Monthly Chart on Transportation

Last Friday, I spoke on Women of Wall Street Twitter Spaces and Fox Business’s Making Money with Charles Payne to talk about a key monthly moving average.What…

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Last Friday, I spoke on Women of Wall Street Twitter Spaces and Fox Business's Making Money with Charles Payne to talk about a key monthly moving average.

What makes this moving average so important right now is that three of the Economic Modern Family members are testing it. The three members, Granddad Russell 2000 (IWM), Grandma Retail (XRT) and Transportation (IYT), well deserve their status as what Stanley Druckenmiller calls the "inside" of the U.S. economy. In fact, the components of the modern family were put together before we heard Druckenmiller's viewpoint. We have observed how predictive they all are in helping us see in advance the next big market direction. Hence, these "inside" indicators -- right now -- are all sitting just above a 6–7-year business cycle low.

For the purposes of this daily and because we have featured this sector a lot lately, the chart of IYT is a perfect example of this moving average and what to watch for. Except for the brief blip in 2011 when the government shut down, and then again during the pandemic, IYT has sat above the dark blue line for 11 years. Currently, that line sits at the 195 area. The same is true with IWM and XRT, both marginally holding their monthly MAs.

So, watch IYT to either hold, and begin a rally possibly back closer to 220, or for IYT to fail 195, in which case we see the whole market selling off further.

To note, the other family members, such as Sister Semiconductors (SMH) and Prodigal Son Regional Banks (KRE) are still sitting well above the monthly MA. Big Brother Biotechnology (IBB), however, is now trading below it. And not in the family, but still notable, is the REIT sector (IYR), also sitting below it. SPY has the same MA, only that one sits at 310 (a long way off).

Incidentally, junk bonds broke down under this moving average in November 2021. The market has been slow to take junk bond's hint.

For more information on how to invest profitably in sectors like biotech, please reach out to Rob Quinn, our Chief Strategy Consultant, by clicking here.

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Mish in the Media

A business cycle is about 6-7 years - where are the indices now and what should you watch for? Mish discusses this question in this appearance on Fox's Making Money with Charles Payne.


ETF Summary

  • S&P 500 (SPY): Testing the previous low; 362 support, 370 resistance.
  • Russell 2000 (IWM): Broke the June low of 165.18; 162 support, 170 resistance.
  • Dow (DIA): Broke June low - 289 support, 298 resistance.
  • Nasdaq (QQQ): Testing the June low; 269 support, 280 resistance.
  • KRE (Regional Banks): Relative outperformer; 57 support, 61 resistance.
  • SMH (Semiconductors): 187 support, 194 resistance.
  • IYT (Transportation): 196 support, 200 resistance.
  • IBB (Biotechnology): 112 support, 118 resistance.
  • XRT (Retail): 55 support, 60 resistance.


Mish Schneider

MarketGauge.com

Director of Trading Research and Education

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Bonds

What will happen to Bitcoin and Ethereum if traditional markets break?

Multiple indicators of economic health all point to a severe recession hitting the US and global economy soon. What could this mean for crypto investors?

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Multiple indicators of economic health all point to a severe recession hitting the US and global economy soon. What could this mean for crypto investors?

Michael J. Burry, the financial wizard who was portrayed in the movie "The Big Short", is known for predicting crises. For instance, his investment fund made billions from the 2008 housing crash, and Burry liquidated almost all his entire portfolio during the 2Q of 2022.

Given that no one seems to know whether traditional markets will bounce before entering a further recessive environment, it might be a good time to consider investing in cryptocurrencies. Below are some examples on how experienced investors sometimes miss incredible rallies.

In May 2017, Burry said people should expect a "global financial meltdown" and World War 3. Instead, the S&P 500 rallied 20% over the following 9 months. A couple of years later, the index peaked in December 2021, at a level that was more than 100% above Burry’s suggested short entry price.

In December 2020, Burry said that Tesla's stock price was "ridiculous" as part of his justification for opening his short position. A 47% rally happened in the 35 days following that remark and Tesla shares peaked 10 months later after a 105% total gain from Tesla’s supposedly "ridiculous" price.

Indicators point to a major recession, but exactly when remains unknown

Without mistake, traders should not dismiss the fact that the U.S. dollar index has rallied strongly against other major global currencies to reach its highest level in 20 years. This shows that investors are desperately seeking shelter in cash positions, exiting stock markets, foreign currencies and corporate debt.

Moreover, the gap between the U.S. Treasury 2y-year and 10-year notes widened to a record-high -0.57% on Sept. 22. Typically, when shorter-term government bonds have higher yields than long-term bonds — an inverted yield curve — it's interpreted as heightened signs of a recession.

Adding to the concerns, on Sept. 22, the U.S. Federal Reserve reported an all-time high of $2.36 trillion in overnight reverse repurchase agreements. In a "reverse repo," market participants lend cash to the FED in exchange for U.S. Treasuries and agency-backed securities. The excessive cash in investors' balance sheets indicates a lack of trust in counterparty credit risk, which is a bearish indicator.

After laying out the three critical macroeconomic indicators hitting levels not seen in over 2 decades, two important questions are left. First, what is Bitcoin (BTC) and Ether (ETH) relation to traditional markets? More importantly, what impact should investors expect if the S&P 500 drops 20% and the housing market crashes?

Regardless of whether a person pays their bills using cryptocurrencies, energy prices, food and healthcare services are heavily dependent on the U.S. dollar. Commodity international transactions are mostly priced in USD, including imports, exports and the actual trading. So even if one pays their expenses using Bitcoin, odds are somewhere along the way, this value will be converted into fiat money.

The cost of borrowing USD impacts multiple economies

The main takeaway from the lack of an effective circular trade exclusively using cryptocurrencies is that everyone's life depends on the U.S. dollar's strength and borrowing cost. Unless one lives in a cave, isolated in a self-sufficient land, or on some communist island, when investors hoard cash and interest rates skyrocket, every market is impacted.

As for an eventual housing market collapse or another 20% crash in stock markets, the truth is its impact on Bitcoin and Ether are impossible to predict. From one side, there's the pressure from holders scrambling to reduce their exposure and secure a cash position for an eventual longer-than-estimated crypto-winter. On the other hand, there could be a surge in investors looking for non-confiscatable assets or seeking protection from inflation.

That's why Michael J. Burry's story becomes relevant right now when every pundit and market analyst claims a near-future market collapse or the potential crash in housing prices. Bitcoin and Ether are facing an imminent global recession for the first time, and judging by March 2020, when a panic selling triggered by the Covid-19 crisis, those that stood for the long run were rewarded.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bonds

Singapore strives to remain relevant amid regulatory tightening for retail investors

Singapore’s largest bank expanded crypto trading for accredited investors only, aligned with financial authorities’ views.
Singapore’s…

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Singapore's largest bank expanded crypto trading for accredited investors only, aligned with financial authorities' views.

Singapore's largest bank, DBS has announced another move to expand its crypto services, while remaining cautious to comply with the financial authorities' view that crypto assets are not suitable for retail investors in the country.

On Friday, the bank disclosed its decision to expand crypto trading services on its digital exchange (DDEx) to approximately 100,000 "wealth clients who are accredited investors." Investors who are considered accredited must meet certain criteria regarding their income, net worth, qualifications and understanding of the financial markets.

Caroline Malcolm, head of international public policy and research at Chainalysis, noted:

"Singapore has long indicated that it views most crypto assets as volatile and as a result, not well-suited to retail investors. At the same time though, it continues to indicate its support for DLT-based innovation, such as in the area of asset tokenization." 

Previously, the DDEx was only available to corporate and institutional investors, family offices and DBS Private Bank and Treasures Private Client customers. DBS is also a trust anchor for the pilot Project Guardian in Singapore, a blockchain-based liquidity pool of tokenized bonds and deposits for borrowing and lending transactions.

The move comes after dramatic months for the crypto space in the country that was once ranked as the most crypto-friendly in the world due to its positive legislative environment. In June, the Monetary Authority of Singapore (MAS)’s chief fintech officer, Sopnendu Mohanty, said in an interview that “if somebody has done a bad thing [in the cryptocurrency industry], we are brutal and unrelentingly hard.”

Another chapter in the regulatory tightening came weeks later, as the authority sent detailed questionnaires to some applicants and holders of the MAS’ Digital Payment Token licenses, reportedly seeking “highly granular information” about business activities. The questions included top tokens owned and staked via DeFi protocols and aimed to intensify the spotlight on crypto firms amid upcoming regulations.

The new framework responds to issues with liquidity and withdrawals that have occurred with firms in the country this year. During this crypto winter, Three Arrows Capital (3AC) went bankrupt after failing to meet margin calls in mid-June.

"After recent events, from the Terra-Luna crash, to 3AC, and also the Hodlnaut exchange collapse, I expect we will see more such measures, aimed at further protecting consumers in the crypto asset market, in the future."

The updated regulatory approach does not seem sufficient to keep crypto firms out of the country. RRMine Global, a Filecoin service provider, recently announced that it has shut down business operations in mainland China and is relocating its headquarters to Singapore after Chinese restrictions narrowed operations for Web3 companies.

Next week, Singapore will host Token2049, an industry conference that was held in Hong Kong before the pandemic. The event is expected to receive over 5,000 attendees, according to its organization. 

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