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Warburg buys majority stake in Source

Warburg buys majority stake in Source

Competition in the exchange traded fund market (ETF) has intensified on news Warburg Pincus has bought a majority stake in Source.

The move was pushed through by former iShares head Lee Kranefuss, who works for Warburg and will join Source as executive chairman, working alongside the firm's chief executive Ted Hood (pictured).   

The US private equity firm bought the stake from a host of US investment banks, including Goldman Sachs and Bank of American Merrill Lynch. Other Source backers include JP Morgan, Morgan Stanley and Nomura and all five banks will remain minority shareholders.

Source, which launched in April 2009, has become one of the leading ETF providers in Europe, raising some $15 billion in assets. It offers a range of equity, fixed income, commodity and alternative market exposure through ETFs and Exchange Traded Commodities (ETCs).

The firm has also teamed up with the likes of Man Group, Legal & General and Pimco to launch innovative products.

Warburg, which has invested more than $45 billion across 675 companies in its 40-year history, and will inject significant capital into Source in a bid to capture market share from the likes of iShares, Lyxor and Deutsche Bank.

The capital will provide Source with the resources to develop and launch new products, enhance existing products, expand client relationships and deliver investor solutions. 

In a statement the pair said they view the ETP industry to represent a substantial opportunity for growth and consolidation from both organic expansion and strategic combinations. 

Hood said: 'I am proud of everything that Source has achieved since it was founded only a few years ago and look forward to building on our success with the support of Lee and Warburg Pincus. This investment will provide us with additional capital to further enhance the value that we offer investors.'

Kranefuss added: 'The ETF industry is at an inflection point and Source offers a unique value proposition to investors through its combination of products providing both innovative funds and market exposure.

'I think that there is a tremendous opportunity for explosive growth over the next couple of years and believe that Source is well placed to become a top tier ETF provider, not only in Europe but also globally.'

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