Daily ETF Watch: Source Closes Only US ETF

April 13, 2015

The closure of the Lee Kranefuss-driven Source Euro Stoxx 50 ETF (ESTX | F-70) means that ETF provider Source, which is well established in Europe, no longer has an ETF listed in the U.S. The shutdown of its only U.S.-listed fund leaves a large question mark hanging over the firm’s future in this country.

 

Kranefuss, formerly the head of iShares, was the public face and leader of Source’s U.S. push. After leaving iShares in the aftermath of its acquisition by BlackRock, Kranefuss joined venture capital firm Warburg Pincus, which later bought a majority stake in Source.

 

Despite a media blitz, ESTX didn’t gain much traction in its roughly seven months of trading, closing out February with less than $20 million in assets under management, well before the fund’s impending April 10 closure was announced.

 

Of course, ESTX had quite a row to hoe. It tracked the exact same index as the $4.9 billion SPDR Euro Stoxx 40 ETF (FEZ | A-77), and even though it was nearly 50 percent cheaper, it wasn’t going to be able to compete with FEZ in terms of liquidity right out of the gate or brand recognition.

 

The Future Of Source In The US

Source launched ESTX last September via Exchange Traded Concepts, not through its own “exemptive relief.” However, in January, the firm filed its own 40-APP form with the SEC requesting wide-ranging relief for self-indexed, fund-of-funds, long/short and 130/30 ETFs.

 

But a recent Source amendment-withdrawal filing with the Securities and Exchange Commission said that Source no longer intended to launch the only other fund it had put into registration, a currency-hedged version of ESTX. That fund was planned under Source’s own exemptive relief, and not that of Exchange Traded Concepts.

 

Also, recently, there had been word that Source has laid off large numbers of staff in the U.S., raising the question of what its plans are. Is it simply regrouping, rethinking its approach and planning its next U.S.-listed fund? Or is it withdrawing from the U.S. marketplace for good?

 

Only the filings and time will tell.

 

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