Big changes are afoot at Lee Kranefuss'
latest venture, on both sides of the Atlantic.
On Friday Kranefuss, executive chairman of Source
the impending departure (slated for yesterday) of Source co-founder and CEO Ted Hood
and the appointment of Jim Polisson
as chief marketing officer. And on Thursday the London-based ETF provider's U.S. arm revealed
plans to shutter its first ETF in the U.S., even as Source awaits regulatory blessings for its next U.S. offering.
Hood's fellow co-founder, Peter Thompson
, will fill Hood's shoes for now while Source searches for its next CEO.
The Financial Times
and Investment Week
reported on Hood's departure, and ETF Trends
reported on Source's U.S. retrenchment. The FT
notes that, despite Source's inflows more than doubling last year to $2.5 billion, its "share of the new inflows [in Europe] fell compared to midsized rivals such as UBS and Amundi."
Hood and Thompson co-founded Source six years ago, and it's now the sixth largest ETF shop in Europe, with more than $19 billion in assets under management as of July 30. It started out as a joint venture of five giant, multinational banks: Bank of America, Goldman Sachs, J.P. Morgan, Morgan Stanley, and Nomura. In January 2014 private equity giant Warburg Pincus swept in to buy a majority stake in Source, while keeping the banks on as minority shareholders. Warburg put one of its own, iShares founder Kranefuss, in the chairman spot at Source. Kranefuss describes
Source's mission as "redefining the basic building blocks of portfolio construction." He states that Source has an "ambitious growth strategy to expand the existing business and to enter new geographies and markets."
the U.S. ETF business in the fall with the launch of its Source EURO STOXX 50 ETF
. On April 10 the ETF will close to new investors and stop trading on the NYSE Arca, and it will liquidate by April 17.
Yet that doesn't mean Source is giving up on its ETF push in the U.S. Jennifer Connelly, a spokeswoman for Source, sent MFWire
an emailed statement:
The decision by Source to close and liquidate the Source EURO STOXX 50 ETF (NYSE: ESTX) is the result of a reassessment of the current ETF marketplace and the needs of U.S. investors and should not be seen as a retreat from the world's largest investment marketplace. As the sixth largest ETF provider in Europe, Source has a well-deserved reputation for delivering the highly differentiated products desired by investors and has committed the resources to do the same in the U.S. Earlier this year, on 12 January 2015, Source Exchange Traded Investments LLC, along with Source ETF Trust and Fund Source (US) LLC, filed an application for exemptive relief in relation to managing passive funds.
More information on the result of that filing will be revealed in the coming months.
Such exemptive relief applications to the SEC are only publicly released by the regulatory agency once its staff starts moving towards approval.
As for the management change back at headquarters, Hood states that "now is the right time for Source to take its business to the next level," and he adds "that the firm is in very good hands and poised for great future success." The FT
reminds readers that three years ago Hood rappelled down the tallest building in Europe, the Shard
in London, "as part of a bet with staff to raise money for charity."
Polisson, like Kranefuss, is a veteran of iShares, where he was head of global marketing from 2000 to 2009. He later led Russell's ETF efforts. Kranefuss lauds Polisson for "his expertise in all aspects of marketing, advertising and branding."
Neil Anderson, Managing Editor
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