ETF savings versus futures will hit record amount this December, Source analysis reveals

New analysis from Source reveals that investors who switch out of futures contracts into ETFs during the quarterly ‘roll’ this December could make record savings…

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Rick van Leeuwen, European Capital Markets at Source

Historically, savings of up to 18 basis points a year were already possible for some investors in some indices, but Source believes that, this month, the potential cost savings for some investors using ETFs could be closer to 30 to 50 basis points on an annualised basis.

The analysis is based on the cost comparison of Source ETFs and futures linked to five leading indexes: the EURO STOXX 50, the S&P 500, the STOXX Europe 600, the FTSE 100 and the MSCI Europe. It shows that for investors seeking long-term exposure to these indices, ETFs are more attractive than ever versus futures.

Source estimates that $100 billion of assets have been switched globally into ETFs from futures over the last two years, largely because of ETF charges falling.  For instance, the Source EURO STOXX 50 UCITS ETF and Source S&P 500 UCITS ETF each have a fee of just 0.05% per annum.

There are four dates of the year when these stock market futures, which provide synthetic exposure to indices, expire and investors replace them with new contracts, otherwise known as “rolling”. The December contracts expire on 18th December, and investors would typically roll in the week leading up to this expiry date.

Historical annual savings on Source ETFs vs futures contracts traded on major European exchanges

Index Annual saving
EURO STOXX 50 0.18%
S&P 500 0.16%
STOXX Europe 600 0.02%
FTSE 100 0.02%
MSCI Europe 0.01%


Rick van Leeuwen, European Capital Markets at Source, commented: “The December roll is typically more expensive for futures contracts. This is because the increased regulatory pressures imposed on banks following the financial crisis means they are less inclined to hold higher-risk assets on their balance sheets towards the end of their financial year. The banks have to hold more collateral to cover this risk, so they help compensate for it by charging higher prices to act as counterparties for futures contracts.

“Even taking the seasonal factors into account, the savings from investing in ETFs rather than futures is at an all-time record high. The final roll cost will not be known until after all the dividends are paid out, in February or March 2016, but all indications right now point to this being much higher than in previous December roll periods, potentially up to 50 basis points  annualised  We believe this offers an excellent opportunity for investors wanting long-term exposure to indices.”



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