Invesco in talks for another ETF play

Invesco Ltd’s bid for the exchange-traded fund business of Guggenheim Partners is a scale play that will do little to boost the investment manager’s ranking among ETF providers, according to sources and an analyst.

Invesco, Atlanta, is in talks to buy the ETF and mutual-fund business of Guggenheim Partners, a source said. The deal would include Guggenheim’s BulletShares ETFs. The talks are at an advanced stage, according to the Financial Times, which first reported news of Invesco’s bid.

Known for its PowerShares ETFs, Invesco has about $127 billion in ETF total net assets as of July 31, Morningstar said. This ranks it fourth among ETF providers. iShares, owned by BlackRock, is still No. 1 with $1.2 trillion in assets, while Vanguard is second with $758 billion and State Street is third with $551 billion, Morningstar said. Guggenheim’s ETFs are a distant eighth with $37 billion, Morningstar said.

A merger of Invesco and Guggenheim ETF units will “benefit the Guggenheim lineup rather than PowerShares,” said Alex Bryan, director of passive strategies research, North America, at Morningstar. “With a bigger distribution network, it will make it easier to sell funds,” he said.

Guggenheim will be able to leverage some of Invesco’s portfolio management and gain distributional efficiencies, Bryan said. “But in terms of overall market share, this will not move the needle that much [for Invesco],” he said.

Invesco manages more than $858 billion in assets. It also owns WL Ross & Co, the private equity firm formed by Wilbur Ross, who is now secretary of commerce in President Donald Trump’s administration. Guggenheim Investments, a subsidiary of Guggenheim Partners, oversees $237 billion in assets, including $37 billion in ETFs and $30 billion in mutual funds, Barrons said.

How much Invesco is bidding for the Guggenheim units is unclear. Barron’s said the price for Guggenheim’s mutual funds and ETFs is rumored to be $2 billion.

Private equity was once a frequent investor of ETF firms. Deals have been scarce of late. In June, China International Capital Corp agreed to buy a majority of Keane Funds Advisors LLC, which is known for its China-focused ETFs. Invesco in April said it would acquire Source, the European ETF provider, from Warburg Pincus.

Invesco and Guggenheim declined comment.

Action Item: Call Jerry Miller, president of Guggenheim Investments, at +1 212-739-0700

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