The two firms will launch a platform offering physically backed ETFs – a move that marks LGIM’s first dedicated move into the ETF sphere.
Source currently offers 15 ETFs that track physical assets, such as precious metals.
LGIM has £264 billion (€376 billion) of assets managed in traditional passive funds and is a major global investor with total assets under management of £717 billion. The firm will be responsible for the daily running of the ETFs, while Source will oversee operational aspects of the platform.
Source intends to appoint Northern Trust, Source’s current service provider, as the platform’s administrator and custodian, subject to regulatory approval.
Source states it has no plans to convert its existing synthetic ETFs into physical products, unlike other ETF providers – such as Deutsche Asset Management and UBS – which have done in recent months. Synthetic ETFs presently comprise over half the firm's £13.2 billion assets.
“The new platform is all about increasing investor choice – we want to enable our investors to select the structure they prefer and are most comfortable with,” says Lee Kranefuss, chairman of Source.
Over 75% of investor flow since January 2014 has been into physical ETFs, says Kranefuss.
“We have a wide variety of investment ideas in the pipeline for 2016, some of which may be more suitable for physical replication and others for alternative methods. The increased flexibility provided by the new platform allows us to further provide what is appropriate for – and demanded by – our investors, and we will do this on a product-by-product basis.”
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