Source launches revenue-based ETFs

June, 2015 Print

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Source, a provider of exchange-traded products (ETPs), has launched a Eurozone Exporters exchange-traded fund (ETF) and a Japan Exporters ETF. Both ETFs track the new STOXX International Exposure indices, which are weighted to exporting companies in a country or index, rather than using a simple market-cap weighting system.

According to analysis by Source, only 33% of the revenues of Japan’s largest 600 companies come from overseas earnings, despite Japan’s reputation as a strong exporting nation. It said that if investors expect quantitative easing by the Bank of Japan to weaken the yen and boost exports, then using the STOXX Japan International Exposure Index will increase foreign revenue exposure to 65%. Source president, Peter Thompson, said: “We are delighted to have worked with STOXX to develop these innovative new indices that will enable investors to construct their portfolios more precisely by using revenue-based indexing. We identified a particular need from our investors to gain more targeted exposure to the topical themes of currency devaluation and quantitative easing; hence these indices focus precisely on those companies in the Eurozone and Japan that have a majority of non-domestic revenues. This could be especially valuable now with both the ECB and Bank of Japan using QE, offering the potential for weaker currencies that is likely to boost exporters’ earnings.”

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