As one of Europe’s leading and most innovative ETF providers, Source continues to set new milestones. Last year, Source Physical Gold P-ETC attracted more net new assets than any of its competitors, adding over USD1.7billion (compared to USD1.2billion in 2011). Moreover, with USD7.6billion in turnover, SGLD was the second most traded ETP on the London Stock Exchange.
Source now manages in excess of USD13billion in assets. Of the 86 ETPs it offers investors, 25 of them each have over USD100million in assets.
Innovation is a key element to the firm’s ongoing success.
As well as providing 19 “primary beta” products such as the S&P 500, MSCI Europe, MSCI Emerging Markets, FTSE 100 etc, Source also offers a range of 53 products delivering beta returns from complimentary secondary benchmarks.
“Our approach to developing products has been to combine primary benchmarks that provide efficient beta exposure and secondary benchmarks such as small-cap indices, optimised sector indices, which round out our pure beta offering. We also offer 11 “beta plus” products and three products that target alpha (actively managed by PIMCO),” explains Michael John Lytle, chief development officer at Source.
Whilst some providers might think that developing ETFs is a simplistic exercise, Source is very much of the opinion that not all ETFs need be alike and that specialisation is valuable if offered in addition to a broad beta product suite.
Its partnership with PIMCO is a great example of innovation at work. The PIMCO EM Advantage Local Bond Index Source ETF, which launched in 2011, uses a smart passive approach to physically replicate index returns. The index itself is GDP-weighted rather than market-cap weighted, to reduce the exposure to more highly indebted issuers; unsurprisingly, there’s a much greater weighting towards BRICs which as a group represented 50% of EM (or 20% of global) GDP in 2012 and are expected to increase to 27% of global GDP share by 2020*.
In the equity space, Source offers an equally innovative product: the Man GLG Europe Plus Source ETF. A long-only product, the “beta plus” element is derived from Man GLG’s unique relationship with brokerage houses, using the highest conviction BUY recommendations from equity analysts in order to trade systematically.
“The strategy harnesses the broker anomaly – there is value in broker recommendations. Man GLG has particularly strong and productive relationships with its brokers. In addition, asset managers typically fail to act immediately on broker recommendations; it may take them 20 days or more. By adjusting exposure promptly on the back of these recommendations, the Index captures more of the upside,” comments Lytle, confirming that the fund now has USD900million in assets.
Last year, Source unveiled the LGIM Commodity Composite Source ETF; a diversified, second generation broad-based commodity ETF with AuM of over USD175 million, but when asked about plans to add further value-added strategies in 2013, Lytle says: “We’re looking but we don’t intend to skew our offering to the detriment of our primary and secondary benchmarks.”
On winning the etfexpress awards, Lytle adds: “We’re very proud and grateful for this recognition from clients and the ETF community. The focus on innovation is, we feel, in keeping with where we at Source are dedicating our energies and have endeavored to differentiate ourselves.”
*According to estimates from Goldman Sachs Economics, March 2013.