Daily ETF Watch: Source Debuts With ESTX

September 23, 2014

Source launches its first U.S.-listed ETF.

Kranefuss Returns With Source
Lee Kranefuss, who helped drive iShares to its No. 1 spot among U.S. ETF issuers before stepping down as CEO after its sale to BlackRock, is back.

After leaving iShares behind, Kranefuss joined private equity group Warburg Pincus to help it identify opportunities in the ETF realm. As a result, Warburg Pincus ended up acquiring a majority stake in Europe’s fourth-largest ETF issuer—London-based Source.

Today Source rolls out its first U.S.-listed ETF, the Source Euro Stoxx 50 ETF (ESTX). The new fund tracks an index widely used in Europe, the Euro Stoxx 50, which covers 50 of the largest stocks from each of 19 eurozone supersectors, according to the prospectus. Eligible components are selected from Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

ESTX is being launched via the Exchange Traded Concepts’ ETF-in-a-Box Solution, with Source serving as the fund’s subadvisor. It comes with an expense ratio of 0.16 percent.

The Source fund’s most direct competitor is the behemoth SPDR Euro Stoxx 50 (FEZ | A-57), which has nearly $5.2 billion in assets under management. However, Source isn’t quite as much an underdog as it might seem in this face-off. In addition to Kranefuss’ involvement, Source has an established track record in Europe.

Plus, ESTX is cheap. FEZ charges 0.29 percent, almost double the cost of the newcomer. That could be enough of a discount to chip away at FEZ’s tremendous lead.

Deep Value ETF Rolls Out
Exchange Traded Concepts is midwifing another fund today. The Deep Value ETF (DVP) tracks an index provided by Tiedemann Wealth Management that screens the components of the S&P 500 for strong fundamentals and then selects the 20 or so most undervalued companies from that subset. Components are weighted according to a tiered system that assigns weight to companies based on the degree to which they are undervalued.

The index uses enterprise value, EBITDA and free cash flow to evaluate how undervalued a company is, according to the prospectus.

DVP comes with an expense ratio of 0.80 percent, or $80 for each $10,000 invested. Mellon Capital Management serves as DVP’s subadvisor.

Global X To Close 2 Funds

Global X Funds announced on Sept. 19 that it would be closing two of its funds, no doubt because of their failure to gather assets.

The day before the announcement, the Global X Canada Preferred ETF (CNPF | C) and the Global X Pure Gold Miners ETF (GGGG | D- 60) had $5.6 million and $4.9 million in assets under management, respectively. Global X said the two funds represented less than 1 percent of the firm’s total assets under management.

The funds’ last day of trading will be Oct. 16, with liquidation occurring on Oct. 24, according to the Global X press release. To date, 53 ETF and ETN closures have been announced this year.

“Global X has seen strong asset growth this past year, and we continue to focus on providing the best solutions for our clients,” said Bruno del Ama, CEO and co-founder of Global X Funds.

 

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