The U.S. is the world’s largest market for exchange traded funds and also the most competitive, but the ultra-competitive nature of the U.S. ETF industry does not mean all new entrants will struggle here.
Source, one of the fastest growing ETF providers in Europe, another highly competitive ETF market, makes its U.S. debut today with the introduction of the Source EURO STOXX 50 ETF (NYSEArca: ESTX). While the Source EURO STOXX 50 ETF will compete with well-established ETFs such as the SPDR EURO STOXX 50 (NYSEArca: FEZ) and the iShares MSCI EMU ETF (NYSEArca: EZU), this is not another run-of-the-mill new ETF launch. It is expected that the Source EURO STOXX 50 ETF will charge just 0.16% per year, making it one of the least expensive Europe ETFs available in the U.S.
“You could think of the EuroStoxx 50 as the ‘SPY’ of Europe and we saw an opportunity to immediately provide access in a more economical way,” said Peter Thompson, president of Source.
Globally, Source has approximately $20 billion in assets under management. In Europe, the company enjoys solid brand recognition within the ETF community there due to Source’s relationships with 10 authorized participants across the continent and some of the largest, most prestigious financial services firms in the world.
“Earlier this year, Warburg Pincus, a global private equity firm focused on growth investing, acquired a majority stake in Source, joining the firm’s management team and five of the world’s largest investment banks—BofA Merrill Lynch, Goldman Sachs, J.P. Morgan, Morgan Stanley and Nomura—as shareholders,” according to a statement issued by Source.
Source also has a leadership advantage that many new ETF providers crave. The company’s executive chairman is Lee Kranefuss, one of the founding fathers of the U.S. ETF industry. While at Barclays Global Investors (BGI), Kranefuss helped oversee the birth and rapid expansion of the iShares ETF lineup.
Kranefuss stayed on with BlackRock (NYSE: BLK) until 2010 after the world’s largest asset manager acquired iShares. Today, iShares is the world’s largest ETF issuer.
Joining Kranefuss are Source CEO Ted Hood, President Peter Thompson and Senior Advisor Richard Goldman, formerly CEO of Rydex|Security Global Investors and COO of Guggenheim Investments.
As Kranefuss notes, integral to Source’s success has been its independent, pure-play status, meaning the firm is exclusively devoted to ETFs and not distracted by other financial services operations.
“As a global independent ETF firm, we are unconstrained internally and free to partner with the world’s leading money managers and other providers of investment content, while still enjoying the support of the largest financial institutions and trading firms,” said Kranefuss in the statement. “These partnerships put Source in a uniqueposition to offer investors access to investment strategies to serve their needs that were previously unavailable and give world class managers exposure to an untapped audience.”
Source’s first U.S. ETF tracks the EURO STOXX 50 Index, which is one of the most widely followed developed market benchmarks in the world after the S&P 500. France and Germany combine for over two-thirds of that index’s weight. Top holdings in the index include France’s Total (NYSE: TOT), Europe’s third-largest oil company, and French pharmaceuticals giant Sanofi (NYSE: SNY). [European Dividend Growth]
EURO STOXX 50
Charts Courtesy: STOXX
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of SPY.