- The fourth-largest ETF provider is now better positioned to offer institutional clients the products and strategies they want, as well as create their own indexes.
Invesco Ltd. has agreed to purchase Guggenheim Partners' ETF business in a $1.2 billion deal that will be announced Thursday, according to sources with knowledge of the deal.
Atlanta-based Invesco will acquire Guggenheim's suite of 79 ETFs, which have $37 billion in assets. Invesco already has about $125 billion in ETF assets.
Guggenheim, which has headquarters in Chicago and New York, has a contingent of its ETF employees in the Windy City, thanks to its 2009 purchase of Lisle-based Claymore Group.
Guggenheim in recent weeks has declined to say how many ETF workers it has in Chicago, but one source familiar with the company puts the figure at about 20. Some of those ETF jobs, plus jobs in other locations, could be in peril as a result of the transaction, the source said.
The deal will expand and round out Invesco's ETF product line, bringing its global total to 195 ETFs and making it the fourth-largest ETF provider. Included in the deal will be Guggenheim's largest ETF, the $13.7 billion Guggenheim S&P 500 Equal Weight ETF (RSP). Invesco will also add Guggenheim's BulletShares fixed-income ETFs and the Guggenheim CurrencyShares series to its offerings.
Guggenheim, for its part, will notch a big gain on its ETF business, which it largely acquired via the Claymore acquisition and a separate purchase of Rydex in 2010. The deal will also let Guggenheim concentrate on its fixed-income mutual fund business, where it has several top-rated bond funds. Guggenheim's six bond mutual funds have seen an estimated net inflow of $7.5 billion this year – a particularly impressive feat, given the massive shift of investor cash from active to passive funds.
"The deal will let Invesco get some benefits of scale and enable it to better compete with the big three ETF providers – iShares, State Street and Vanguard," said Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA. Even with the Guggenheim ETFs, however, Invesco will still trail the big three, which have 83% of the ETF market, he said. iShares alone has 40% of the ETF market.
The deal is a good fit for both companies, in that their ETF lineups are fairly dissimilar, Mr. Rosenbluth said. Guggenheim's stock ETFs concentrated on equal-weighted funds and so-called pure investment styles, such as the Guggenheim S&P 500 Pure Growth ETF (RPG). Invesco's PowerShares had success with its quality and low-volatility offerings.
The deal should be closed in the second half of 2018. Dan Draper, managing director global ETFs at Invesco PowerShares, will run the expanded business lineup. The company will later evaluate its product lineup and any ETF overlap.