Source Cuts Fee on S&P 500 ETF To 0.05%

June 23, 2014

Exchange traded product provider Source has announced that it has cut the price of its S&P500 UCITS ETF by 15 basis points to 5bps, making it one of the cheapest ETFs on the market.

The ETF, which was previously priced at 0.20 percent (or 20 basis points), has returned 19.83 percent over 12 months to May 2014, outperforming the 19.69 percent return of the S&P 500 total return (net) index, and has nearly €750  million ($1 billion) in assets.

A note from Source said that the S&P 500 is very difficult for active managers to outperform, thereby making a particularly strong case for passive fund management of US large cap exposure.

Michael John Lytle, Chief Development Officer, said: “When gaining exposure to US large caps 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,” he added.

The swap-based UBS S&P 500 UCITS ETF also has a total expense ratio of 5 basis points and has roughly €96 (£77) million in assets under management.

 

 

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