Liquidity, innovation, transparency. It starts here. In partnership with BofA Merrill Lynch Goldman...

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Liquidity, innovation, transparency. It starts here. In partnership with BofA Merrill Lynch Goldman Sachs J.P. Morgan Morgan Stanley Nomura PIMCO Man GLG
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Transcript of Liquidity, innovation, transparency. It starts here. In partnership with BofA Merrill Lynch Goldman...

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Liquidity, innovation, transparency. It starts here. In partnership with BofA Merrill Lynch Goldman Sachs J.P. Morgan Morgan Stanley Nomura PIMCO Man GLG Slide 2 2 The European ETF market is crowded but relatively inefficient Assets under management are growing but market penetration is still shallow Liquidity in Europe does not compare to the US Source one of the fastest growing ETF providers in Europe Outstanding AUM of over US$8.5 BN and trading turnover of US$200 BN in 2 year period since launch one of the fastest growing ETF providers in Europe Through its partners, Source is uniquely positioned to deliver highly liquid products and therefore significantly reduced trading costs. Owned by five of the worlds largest equity trading houses BofA Merrill Lynch, Goldman Sachs, JP Morgan, Morgan Stanley and Nomura Source has leveraged its core partners, as well as 20 other partners including PIMCO and Man GLG, to deliver investors enhanced returns through reduced trading costs Most robust and transparent solution to counterparty risk in the market: counterparty risk management incorporates counterparty diversification, strict risk limits, unparalleled investor transparency with full investment in listed equities. In the first 2 years, the amount owed to our funds by our swap counterparties has been close to zero Source: Introducing our story Slide 3 3 AuM growth: Europe vs. US The ETP industry: European market is reaching an inflection point The European ETP market has had a strong start. Will growth continue to accelerate? Even with no AuM growth, there is a US$473 BN opportunity in Europe if the ETP market share rises from 2.0% to 4.6% Data: Morgan Stanley, European Fund and Asset Management Association (EFAMA) 1 EFAMA as of Q4 2010 2 Source: Blackrock as of April 2011 AuM (US$ BN) USEurope Total investment fund assets (TIFA) US$25 trillionUS$18 trillion ETP market share of TIFA 2 US$1,140 BN (4.6%)US$364 BN (2.0%) Slide 4 4 US vs. European ETF average daily trading volumes The ETF industry: US trading volumes dwarf Europe U.S. ETF on-exchange average daily trading volumes are over US$66 BN (over 6% of AuM) vs. European ETF volumes of US$3.2 BN/day (1% of AuM). What are the big differences between the US and European ETF markets? Data: Factset, Bloomberg and Goldman Sachs, Blackrock. As of April 2011 USEurope Exchanges222 Avg. products per index14 # of funds1,2161,674 Product providers2931 Total ETF AuMUS$ 1,140 BNUS$ 364.1 BN Average AuM/ProductUS$ 937 MMUS$ 217 MM The US ETF market is not only larger, but meaningfully more concentrated. Slide 5 Data: Source, May 2011 5 Source: Meaningful momentum Since launch in April 2009, Source has seen significant AuM growth Source total AuM is US$8.5 BN Over US$1 BN raised in the Source Physical Gold P-ETC Over US$887 BN raised in RDX Source ETF Over 500 MM raised in EUROSTOXX 50 Source ETF 20 funds with over US$100 MM in assets Source AuM growth -BofA Merrill Lynch-Baader Bank-IMC -Goldman Sachs-Banca IMI-Jane Street -J.P. Morgan-BNP-Knight Capital -Morgan Stanley-Commerzbank-LaBranche -Nomura-Credit Suisse-Newedge -PIMCO-DekaBank-Optiver -Man GLG-Euro Invest Bank-RBS -Nyenburgh-Exane-SG Securities -FlowTraders-UniCredit -HSBC The partners US$ BM Slide 6 6 In recent years, with the introduction of ETPs secured by physical precious metals, demand has soared. To date, over US$120 BN have been invested in physical precious metal ETPs globally, making these products the single largest non-governmental holders of precious metals. Investors often look to precious metals as a safe haven and store of value. Physical commodity ETPs provide an efficient and convenient exposure to precious metals. Source P-ETCs: Precious metals have become a valuable financial investment NameBBG TickerExchangeFixed fee Source Physical Gold P-ETCSGLD LN / SGLD SWLSE / SIX0.29% p.a. Source Physical Silver P-ETCSSLV LNLSE0.39% p.a. Source Physical Platinum P-ETCSPPT LNLSE0.39% p.a. Source Physical Palladium P-ETCSPAL LNLSE0.39% p.a. Source Physical P-ETCs Why physical investment? Accurate tracking of underlying spot price Transparency about the location and title of the underlying precious metal Ability to access the metal if need Why Source Physical P-ETCs? Secured by physical precious metals Transparent and competitive cost structure Liquidity provided by worlds leading trading houses Slide 7 Source ETFs Physical funds, with swap enhancement Multiple authorised participants provide trading liquidity Diversification of credit risk across multiple counterparties, with maximum counterparty exposure of 4.5% (more aggressive than UCITS requirement) and in practice counterparty exposure that tends to range between +2% and -2% and averages at 0% PIMCO Source Fixed Income ETFs Direct access to PIMCOs fixed income expertise Sources proven distribution model and ability to enhance trading liquidity Source commodity T-ETCs Total-return performance of 27 members of the S&P GSCI index family Fully collateralised by US Treasury Bills and cash; listed and traded on SIX and XETRA Physically secured commodity P-ETCs Secured by physical metal; listed and traded on the LSE or SIX (SGLD only) Transparent and competitive cost structure Source: The full product offering 7 54 Source ETFs 27 Commodity ETCs 4 P-ETCs 4 Alternative Asset ETFs 3 Fixed Income ETFs Slide 8 88 Source: The website Home page with the latest product information, conference call details and press releases Product tab with all available product information including summary data, index overview and legal documents How to trade explanation of execution process About Source - our mission, value statement, employees, founders and partners Contact us - Source and our trading partners Slide 9 9 Why did Source need a new data centre partner: Our architecture has changed rapidly as we made the fundamental move from a trade workflow tool to a trade execution system Primary requirements: A provider that has real credibility in the financial markets space A fully managed service Improved resiliency required to support real time trade execution Flexibility to add extra capacity and/or new capabilities to the platform without further change in data centre provider Right sized platform that can be expanded vertically (more powerful hardware) and horizontally (additional hardware) and a strong local and international presence to support future growth plans Selecting a new vendor Slide 10 10 Five vendors were shortlisted as potentially candidates. After initial due diligence, the shortlist was reduced to four vendors. The vendor selection process Key measuresVendor 1ColtVendor 2Vendor 3 Resiliency Flexibiliity Global presence Clients Cost for high availability Not available on current service E-commerce (retail) High cost Fully HA Primary + auto failover to secondary Additional capacity can be added through virtualisation of resources or additional physical machines US, UK, Europe & Asia - KVH Financial services and exchanges Fully HA Primary + auto failover to secondary Additional capacity can be added through virtualisation of resources or additional physical machines US & UK Additional capacity through use of additional physical machines US, UK & Asia Medium cost Range of industries including some financial services Medium cost Fully HA Primary + auto failover to secondary Additional capacity can be added through virtualisation of resources or additional physical machines US, UK, Europe & Asia Financial services, exchanges, brokers and investment banks High cost Slide 11 11 Vendor scoring following technical workshops (max score 110) The outcome After the initial due diligence and a round of interviews, a series of detailed technical workshops were undertaken with the remaining three vendors The two highest scoring vendors, Colt and Vendor 1 were invited to present to Source senior management in early January and Colt were officially selected on 31st January 2011 Colt were selected by Source based on: -The extent of their technical capabilities; -Proven strength in the financial markets space; -Overall commitment displayed during the bid process The migration from our current vendor is currently in progress and we expect to have migrated into our new facility by Q3 2011 Slide 12 Source UK Services Limited 14th Floor, One Angel Court London EC2R 7HJ T + 44 (0)20 3370 1100 F + 44 (0)20 3370 1101 Authorised and Regulated by the Financial Services Authority Key disclaimer information: This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. This information is confidential and is solely for your internal use. This information is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information, or with respect to the terms of any future offer of transactions conforming to the terms hereof. We do not undertake to update this information. Certain assumptions may have been made in the analysis that resulted in any information and returns/results detailed herein. No representation is made that any results/returns indicated would be achieved or that all assumptions in achieving these returns have been considered or stated. Changes to the assumptions may have a material impact on any results/returns detailed. Source UK Services Limited and its affiliates disclaim any and all liability relating to this information, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, this information. Additional information is available on request. Source UK Services Limited (Source) and others associated with it may deal as principal in or own or act as market maker for securities and instruments mentioned herein or of issuers mentioned herein and may also advise or seek to advise issuers of such securities and instruments. Where you provide us (or our associates) with information relating to a customer order or proposed transaction, we may use that information to facilitate the execution of your order or transaction, in managing our market making, other client facilitation activities or otherwise in carrying out our legitimate business (which may include, but is not limited to, hedging a risk or otherwise limiting the risks to which we are exposed). Past performance is not necessarily indicative of future results. Price and availability are subject to change without notice. Source does not give investment, tax, accounting and legal or regulatory advice and prospective investors should consult with their professional advisors. Unless indicated, these views are the author's and may differ from those of Source or associated companies. This communication is a marketing communication. This communication is directed at sophisticated prospective investors in order to assist them in determining whether they have an interest in the types of security described herein. In the UK it is directed only to those persons who are eligible counterparties or professional clients and must not be acted on or relied upon by retail clients (each as defined in the UK Financial Services Authority's rules). 2011 Source UK Services Limited. All rights reserved. COLT_01062011