(Bloomberg) -- All ETFs should have this problem.

Lyxor Asset Management is having no trouble finding buyers for its ETF that tracks Italian mid-cap stocks. The issue is producing enough shares to meet a sudden surge in demand.

The Lyxor FTSE Italia Mid Cap PIR ETF is the only one compliant with a new Italian law that offers tax breaks for certain investment plans, as indicated by the acronym PIR in its name. Medium-sized Italian companies are the main beneficiaries of the tax law that gives breaks on investments in funds that hold 70% of their assets in Italian stocks and bonds.

The fund was launched in 2014. Since the law went into effect at the beginning of this year, its $262 million of inflows have pushed its assets to $341 million.

Lyxor says it isn't capping share creations, but it is managing activity because locating enough of the underlying securities to fill the fund isn't easy.

"Some of those companies trade on quite low volumes," said Adam Laird, head of ETF strategy for Northern Europe at Lyxor. "We're trying to keep it orderly because it's important that the trading doesn't end up skewing the market and creating price distortions."

The FTSE Italia Mid Cap Index, which the fund tracks, has gained 15% since the beginning of the year, reaching its highest level in nine years.

On March 3, Lyxor altered the ETF's name to include the name of the tax break, fueling another pickup in demand. Flows are now coming in at an average of about $8.63 million a day and the fund is trading at a 1.1% premium to its net-asset value, a record high.

"We've kept the fund open, we've kept it trading," Laird said. "The popularity of this tax scheme has been evident from the trading that we've seen and I think that will continue to attract investment."

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