InvestmentsNov 23 2015

Source agrees LGIM tie-up for physical ETFs launch

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Source agrees LGIM tie-up for physical ETFs launch

Source and Legal & General Investment Management (LGIM) have partnered to launch a physical ETF platform, Source Markets II, next year.

LGIM will act as the investment manager for the physical fund platform while Northern Trust, Source’s current service provider, will be the administrator and custodian.

Source said the platform will expand on its 15 physical products which include fixed-income, precious metals and a China A-shares equity offering.

The launch signals a further interest from LGIM, one of the largest providers of index-tracking funds in Europe, to expand into the ETF market. The two companies first joined forces to offer a commodity ETF in 2012.

Source added it has no plans to convert any of its existing synthetic products from its multi-counterparty swap model.

Lee Kranefuss, chairman of Source, explained the platform will give investors the choice of which structure they wish to use, be it physical or synthetic.

He said, “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 new offerings will be consistent with the characteristics of Source’s existing ETFs, including intraday trading, increased liquidity and a full list of holdings published daily on the provider’s website.

Mr Kranefuss also said that Source will use the new platform for further expansion in 2016.

Earlier this month, Source told Investment Adviser it had been approached by a number of asset managers looking to partner, as more active managers look to branch into the ETF space.