Interview: Multi-Counterparty Model and Liquidity

Source's Michael John Lytle discusses the appeal of the multi-counterparty model and liquidity in the European ETF market

Ben Johnson 16 August, 2010 | 10:37AM
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We recently spoke with Michael John Lytle, Director of Marketing for Source to discuss the firm’s recent success in attracting new assets, its liquidity-centric approach, and the merits of using multiple swap counterparties for synthetic replication funds.

According to Deutsche Bank research, Source witnessed approximately EUR 2 billion in net cash inflows during the second quarter. This ranks first amongst all European ETF providers and has helped Source to climb to the number eight spot in Europe ETF league table—as ranked by assets under management.

The Appeal of the Multi-Counterparty Model
Source’s liquidity-centric approach to constructing its funds and its approach to creating value for investors has attracted the attention of many hedge funds that formerly used over the counter (OTC) swaps to get sector exposure. In fact, according to Lytle, “We think that we have moved perhaps 50% of the outstanding OTC sector swaps into our ETFs”.

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Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.