US ETF Industry: Ch-Ch-Changing

July 25, 2017

Hong Kong Firm Buys Alerian

Following that, there was another deal involving a U.S. ETF issuer and a Chinese firm. ZZ Capital International, a Hong-Kong based firm, agreed to buy U.S. index provider and ETF issuer Alerian in a deal Reuters reports to be more than $800 million.

While more of an index provider than ETF issuer, Alerian runs the largest master-limited partnership ETF, the Alerian MLP ETF (AMLP), which has just over $10 billion in assets, as well as the Alerian Energy Infrastructure ETF (ENFR), with a fraction of AMPL’s assets, at $36 million.

Like KraneShares’ direct focus on China, Alerian has built its reputation on energy-related, master-limited partnership indexes. It’s a pretty simple sales pitch, or reason for attraction.

London Firm Buys Janus

The last ETF issuer to be bought was in October 2016, again, by a foreign buyer. London-based asset manager Henderson Group agreed to buy U.S. rival and ETF provider Janus Capital Group in a $6 billion deal. Although a tiny player in the ETF industry using the Janus ETF brand, the firm also owns VelocityShares, which has 19 levered and inverse ETFs with a total of more than $3 billion in assets.

While Henderson may not have bought Janus because of its ETF businesses, the companies said at the time of sale this would help both firms cut costs. Falling fees are impacting the business models of asset managers, from top to bottom.

This may be prompting the idea for some ETF issuers to sell now, because the grind is going to get grittier.

Top Of The Food Chain

The largest ETF issuer under the iShares brand and the largest asset manager in the world, BlackRock, is highly unlikely to be bought, but who knows? With more than $5 trillion in AUM and more than $1 trillion in U.S.-listed ETF assets, the firm is the dominant player in the ETF space.

iShares took in nearly half the $250 billion in new U.S.-listed ETF assets for the first six months of the year, but the firm this month reported less-than-expected revenues for the past quarter. The firm has seen a move away from its more profitable active management business clearly into its low-cost ETFs.


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