Source slashes price of S&P 500 ETF to just 0.05%

Jun 23rd, 2014 | By | Category: Equities

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Source, one of Europe’s leading providers of exchange-traded funds, has slashed the management fee on its S&P 500 ETF. At just 0.05%, or five basis points, the Source S&P 500 UCITS ETF (SPXS) is now one of the most aggressively priced ETFs globally.

Source slashes price of S&P 500 ETF to just 0.05%

Source has slashed the management fee on its S&P 500 ETF to just 0.05%. The S&P 500 provides exposure to US large cap stocks including blue chip giants such as Apple, Exxon Mobil, Microsoft, Johnson & Johnson and General Electric.

Already one of the most efficient S&P 500 ETFs in Europe, the cut in management fee will further contribute towards the fund’s accurate and stable performance versus the index.

Even before reducing the management fee, the ETF had 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, which is listed on the London Stock Exchange, SIX Swiss Exchange and Deutsche Börse, has already attracted substantial inflows over the past year and is now approaching $1 billion in assets. The fee reduction will likely draw in even more investors.

It is also worth noting that the S&P 500 index – the benchmark for US large cap stocks – is all but impossible for active managers to outperform consistently, thereby making a particularly strong case for passive fund management in this market.

Commenting on the fee reduction, Michael John Lytle, Chief Development Officer at Source, said: “At Source, we believe in the importance of both offering investors highly efficient market beta as well as compelling differentiated strategies. Due to developments in market cost structures, we saw an opportunity to reduce the management fee on our S&P 500 fund.  This further enhances the already outstanding performance of this fund.

“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.”

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