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THIS WEBSITE IS AIMED AT CLIENTS IN FINLAND WHO QUALIFY AS PROFESSIONAL CLIENTS OR PROFESSIONAL INVESTORS

The UCITS ETFs listed on this website are funds under both Amundi ETF and Lyxor ETF denomination.

This website is published by Amundi Asset Management (Amundi), a French asset management company approved by the French Financial Markets Authority (Autorité des Marchés Financiers, 17 place de la Bourse, 75082 Paris Cedex 02) under the UCITS (2009/65/EC) and AIFM (2011/61/EU) directives.

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professional client for the purposes of the MiFID (2004/39/EC) and the AIFMD (2011/61/EU) as implemented in Finland is one of the following:

  • an entity required to be authorised or regulated to operate in the financial markets. The following list includes all authorised entities carrying out the characteristic activities of the entities mentioned, whether authorised by an EEA State or a third country and whether or not authorised by reference to a directive:
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  • an insurance company, a pension insurance company, a pension fund;
  • an entity that deals exclusively on own account in financial derivatives for the sole purpose of hedging positions on derivatives markets or deals for the account of other members of those markets or makes prices for them and is guaranteed by clearing members of the same markets;
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 a large undertaking, meeting two of the following size requirements according to the financial statements of the last preceding financial period:
 

  • balance sheet total of at least EUR 20,000,000
  • net turnover of at least EUR 40,000,000
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-        the State of Finland, the State Treasury, the province of Åland, foreign national and regional governments as well as foreign public bodies managing public debt;
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·         the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
·         the size of the client’s financial instrument portfolio exceeds EUR 500,000;
·         the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.
 
A professional investor for the purposes of the UCITS (2009/65/EC) as implemented in Finland is one of the following:

-         an entity required to be authorised or regulated to operate in the financial markets, as defined above under ‘professional client’;
-         a large undertaking, meeting the requirements set out above for professional clients
-         the State of Finland, the State Treasury, the province of Åland, foreign national and regional governments as well as foreign public bodies managing public debt;
-         the European Central Bank, the Bank of Finland and similar foreign central banks as well as the International Monetary Fund, the World Bank and similar international associations and organisations;
-         institutional investors that, as their main field of activity, invest in financial instruments;
-         other investors that have notified the fund management company, UCITS or its representative in writing that they, on the basis of their expertise and experience in investing activities, are professional investors, and meet at least two of the following criteria:
·         the investor has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
·         the size of the investor’s financial instrument portfolio exceeds EUR 500,000;
·         the investor works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.
 
The above definitions are only extracts and are as such not exhaustive. For further details please refer to the Finnish Investment Services Act (747/2012) and the Finnish Investment Funds Act (48/1999).
 
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Lyxor and Amundi UCITS compliant Exchange Traded Funds ( UCITS ETFs) referred to on this website are open ended mutual investment funds (i) established under French law and approved by the Autorité des Marchés Financiers (the French Financial Markets Authority), or (ii) established under Luxembourg law and approved by the Commission de Surveillance du Secteur Financier (the Luxembourg Financial Supervisory Committee). Most, if not all, of the protections provided by the Finnish regulatory system generally and for funds authorised in Finland do not apply to these exchange traded funds (ETFs). In particular, investors should note that holdings in this product will not be covered by the provisions of the Financial Services Compensation Scheme or by the Finnish Investors’ Compensation Fund.
 
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Index Replication Process
 

UCITS ETFs follow both physical and synthetic index replication process.
 
However, most  UCITS ETFs follow synthetic replication process. This consists of entering into a derivative transaction (a ‘Performance Swap’, as defined below) with a counterparty that provides complete and effective exposure to its benchmark index. Amundi has adopted this methodology in order to minimise tracking error, optimise transaction costs and reduce operational risks.
 
A Performance Swap is a contractual agreement which is negotiated over-the-counter (OTC) between two parties: the UCITS ETF and its counterparty. From a risk perspective, each Performance Swap ranks equally with other senior unsecured obligations of the counterparty, such as common bonds (i.e., same rights to payments). In the Performance Swap, the counterparty of the UCITS ETF commits to pay the UCITS ETF a variable return based on a pre-determined benchmark index, instead of a fixed stream of income (as in bonds). At the same time, the counterparty will receive from the UCITS ETF the performance and any related revenues generated by the basket's assets (excluding the value of the Performance Swap) held by the UCITS ETF. Information provided on individual ETFs includes data on the basket relating to the ETF and the percentage value of the basket represented by each asset. The information is relevant to the closing values on the date given. 
 
Investment Risks
 
The UCITS ETFs described on this website are not suitable for everyone. Investors' capital is at risk. Investors should not deal in this product unless they understand, having obtained independent professional advice where necessary, its nature, terms and conditions, and the extent of their exposure to risk. The value of the product can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates. If a fund is quoted in a different currency to the index, currency risks exist.
 
Prior to any investment in any UCITS ETF, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us. We recommend that you consult your own independent professional advisors (including legal, tax, financial or accounting advisors, as appropriate).
 
Specific Risks
 
·         Capital at Risk. ETFs are tracking instruments: Their risk profile is similar to a direct investment in the Benchmark Index. Investors’ capital is fully at risk and investors may not get back the amount originally invested. Investments are not covered by the provisions of the Financial Services Compensation Scheme (“FSCS”), the Finnish Investors’ Compensation Fund or any similar scheme.
·         Counterparty Risk. Investors may be exposed to risks resulting from the use of an OTC Swap with any counterparty. Physical ETFs may have Counterparty Risk resulting from the use of a Securities Lending Programme.
·         Currency Risk. ETFs may be exposed to currency risk if the ETF or Benchmark Index holdings are denominated in a currency different to that of the Benchmark Index they are tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.
·         Replication Risk. ETFs are designed to replicate the performance of the Benchmark Index. Unexpected events relating to the constituents of the Benchmark Index may impact the Index provider’s ability to calculate the Benchmark Index, which may affect the ETF’s ability to replicate the Benchmark Index efficiently. This may create Tracking Error in the ETF.
·         Underlying Risk. The Benchmark Index of a UCITS ETF may be complex and volatile. When investing in commodities, the Benchmark Index is calculated with reference to commodity futures contracts which can expose investors to risks related to the cost of carry and transportation. ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.
·          Liquidity Risk. On-exchange liquidity may be limited as a result of a suspension in the underlying market represented by the Benchmark Index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, Market Maker systems; or an abnormal trading situation or event. 
 
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Tax

 
Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, inter alia, depend on an individual’s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned on this website. 
Further information on the risk factors are available in the Risk Warning section of the website.
 
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13 Apr 2021

Investing in Financials – two potential paths

The re-rating of Financials has been rapid since the market turmoil a year ago, spurred by the ongoing recovery in activity and Covid-19 vaccine rollout. Valuations remain attractive, and the reflation theme should support Financials over the medium term. In our latest Expert’s View, we look at allocation opportunities both in equity (MSCI World Financials) and credit (ESG filtered Floating Rate Notes).

Why now?

  • A supportive economic backdrop: The combination of Covid-19 vaccine deployment and a highly accommodative policy mix (fiscal and monetary) have paved the way for a strong rebound in global economic activity since H2 2020. GDP in most developed economies is expected to return to pre-crisis levels by the end of 2021, a much quicker pace compared to the Global Financial Crisis, particularly in the US.
  • Further curve steepening ahead: Central bank support will keep short-term rates anchored for now. Recent guidance suggests that they feel no compelling need to counter curve steepening yet. Market expectations, measured by overnight indexed swaps, have shifted following the 16 June FOMC meeting and are now for a Fed rate hike in late 2022/ early 2023 while the ECB is not expected to raise rates before 2024.


Why Financials?

  • Financials are sensitive to higher inflation and steeper yield curves. In the subsector of commercial banks, a steeper yield curve and high deposit levels should increase profit margins. Investment banks should benefit from buoyant liquidity conditions, and higher M&A and primary market activity.
  • MSCI World Financials: The MSCI World Financials Index is dominated by US banks. Lending is a central revenue source in Banking, Capital Markets and Consumer Finance. These three industries make up ~70% of the index, while the US represents ~50% of the country exposure.
  • Increase Financials exposure via Floating Rate Notes: FRN indices hold a greater exposure to Financials and credit risk without duration risk, compared to traditional bond indices. ESG filtered FRN indices offer an even greater exposure to Financials. 

expert's view

Equity route – the MSCI World Financials index

With long-term government bond yields likely to head higher as global activity recovers, the Financials sector should remain supported, given its sensitivity to higher inflation and steeper yield curves.

Learn more about the Lyxor MSCI World Financials UCITS ETF

 Credit route – Floating Rate Notes

Floating Rate Notes (FRNs) are well suited products to gain exposure to the Financial sector in the credit market. FRN indices hold a large exposure to Financial bonds (60%-70%) compared to traditional nominal corporate bond indices (read the full Expert’s View for details).


Learn more about the Lyxor $ Floating Rate Note UCITS ETF or the Lyxor Euro Floating Rate Note UCITS ETF



Risk Warning

This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets in Financial Instruments Directive 2014/65/EU. These products comply with the UCITS Directive (2009/65/EC). Société Générale and Lyxor International Asset Management (LIAM) recommend that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID are available free of charge on www.lyxoretf.com, and upon request to client-services-etf@lyxor.com.

Except for the United-Kingdom, where this communication is issued in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658, this communication is issued by Lyxor International Asset Management (LIAM), a French management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS (2014/91/EU) and AIFM (2011/61/EU) Directives. Société Générale is a French credit institution (bank) authorised by the Autorité de contrôle prudentiel et de résolution (the French Prudential Control Authority).

The products mentioned are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on the London Stock Exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. Updated composition of the product’s investment portfolio is available on www.lyxoretf.com. In addition, the indicative net asset value is published on the Reuters and Bloomberg pages of the product, and might also be mentioned on the websites of the stock exchanges where the product is listed.

Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. It is each investor’s responsibility to ascertain that it is authorised to subscribe, or invest into this product. This document is of a commercial nature and not of a regulatory nature. This material is of a commercial nature and not a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (together with its affiliates, Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.

Research disclaimer

Lyxor International Asset Management (“LIAM”) or its employees may have or maintain business relationships with companies covered in its research reports. As a result, investors should be aware that LIAM and its employees may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see appendix at the end of this report for the analyst(s) certification(s), important disclosures and disclaimers. Alternatively, visit our global research disclosure website www.lyxoretf.com/compliance.

Conflicts of interest

This research contains the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to (i) ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees.

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