Big Bucks and IWM Chicanery

June 28, 2007

The first thing to note on the Rydex deal is that it appears to have been considerablly less than the upper end of the rumors that had been floating around.  I'm hearing closer to $500 million than a billion.  What's your operation worth?

It's no secret that the "end game" has been driving a good portion of the new product that has been hitting the market globally.  And with many of these new shops either looking at or taking VC money, it's all about a liquidity event, at that point likely under contract. 

It sure seems to me like some of the valuations out there just seem insane...and Matt has looked at some of those numbers already in an excellent blog entry here

As an update to that, at the estimated actual price (about half of the conjecture when Matt wrote that blog) it breaks down to a 30 to 1 ratio of assets to value.  That would put Rydex at the high end of mutual fund managers and at the lower end of the existing ETF issues we can put or could put a public value on (PowerShares and WisdomTree).

I guess it's not too surprising...maybe the insanity is simmering down a bit?  Also Rydex had bled on the fund side a bit even as its ETFs (which are by and large lower margin - GOOD products by the way) took in bigtime assets.

Here's another one for you.  I'd missed this live, but got a note, as yet unverified, that 10 billion of the 11 billion or something like that, of the iShares Russell 2000 fund was redeemed at Russell rebalance. 

OK - I can do better than that.  I just went into my handy AMEX ETF assets spreadsheets, and I see that on June 18, IWM assets were just over $12 billion. Russell rebalance was on June 22.  On June 22 close, IWM assets sat at $2.8 billion!  Today they've recovered back to $7.4 billion, but are still far off of pre rebal assets.

So we're on that story.  A market maker playing the rebal? The CME's revenge for the ICE deal

That will be an interesting one to get to the bottom of.  We'll be working on that one tomorrow, but if you know something or think something, post comments below or on the discussion board or drop me an email at [email protected] 



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