Source announce that it has made a substantial reduction to the management fee on the Source S&P 500 UCITS ETF…
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Michael John Lytle, Chief Development Officer
At 0.05%, this makes it one of the most aggressively priced ETFs delivering S&P 500 exposure. Source’s reduction of the management fee combined with its highly efficient fund management process, results in very accurate and stable performance versus the index. It is also worth noting that the S&P 500, as the best known US large cap benchmark, is very difficult for activemanagers to outperform, thereby making a particularly strong case for passive fund management of US large cap exposure.
Even before reducing the management fee, the fund has returned 19.83% over the 12 months to 31 May 2014, outperforming the 19.69% return of the S&P 500 Total Return (Net) Index. The fund has already attracted substantial inflows and is now approaching $1 billion of assets.
“At Source, we believe in the importance of both offering investors highly efficient market beta as well as compelling differentiated strategies,” explains Michael John Lytle, Chief Development Officer. “Due to developments in market cost structures, we saw an opportunity to reduce themanagement fee on our S&P 500 fund. This further enhances the already outstanding performance of this fund.
“When gaining exposure to US large caps”, Lytle continues, “the importance of passive management comes to the front. In highly efficient markets, it is notoriously difficult for active fund managers to deliver outperformance, especially on a consistent basis. For example, only five out of more than 500 US large cap funds available to European investors have managed to beat the S&P 500 over each of the last five years, and none of those were actively managed.
“Passive ETFs really stand out in delivering market exposure to developed markets like the US, where investors want a consistent after-fees return relative to the index. Total cost of ownership is the most important element when evaluating ETF performance but headline fees are an important driver and one that is easy for all investors to observe.”