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Source to launch physical fund platform


ETF provider, Source, has appointed Legal & General Investment Management as the investment manager for a new physical fund platform, Source Markets II Plc. 

LGIM has GBP264 billion in index funds in Europe and assets under management of GBP717 billion.  In addition, Source has appointed Northern Trust, its current service provider, as the administrator and custodian for the new platform. These appointments are subject to regulatory approval.
The firm writes that the new platform will expand Source’s capacity to launch a wider range of physically replicated products, adding to its current range of 15 physical products, including fixed income ETFs, precious metal ETPs and a China A-shares equity ETF. The launch of this platform will be complementary to the existing range of ETPs. Source emphasises that it has no plans to convert any of its existing exchange traded products from its multi-counterparty swap model.  Indeed, the firm continues to see strong investor demand for ETFs that use this next generation platform to reduce tracking error.
Lee Kranefuss, Chairman of Source, says: “The new platform is all about increasing investor choice.  We want to enable our investors to select the structure they prefer and are most comfortable with.  Furthermore, having capabilities to launch more physical products will also allow us to target a wider investor base. Over 75 per cent of investor flow since January 2014 has been into physical ETFs, so there is clearly strong demand for this type of replication method, and we intend to offer all of our investors the choice they deserve.”
The characteristics of the ETFs will be the same across all Source platforms, including intraday trading, increased liquidity and a full list of holdings published daily on the Source website.  In fact, investors should not see much, if any, difference when buying or selling ETFs on the new platform as they do on one of the existing platforms.
Kranefuss says:  “We have a wide variety of investment ideas in the pipeline for 2016, some of which may be more suitable for physical replication and others for alternative methods.  The increased flexibility provided by the new platform allows us to further provide what is appropriate for – and demanded by – our investors, and we will do this on a product-by-product basis.”   

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