BlackRock To Buy Guggenheim Canada ETF Unit

January 12, 2012

BlackRock looks to build up Canada presence with purchase of Claymore Investments.

BlackRock Inc., owner of Canada’s biggest ETF operation, is acquiring Guggenheim’s Canadian subsidiary Claymore Investments, Canada’s No. 2 ETF fund sponsor, in an all-cash transaction that will provide BlackRock with a broader base from which to build its presence in Canada. Terms weren’t disclosed.

For Guggenheim, the move appears to reflect the company’s intent to focus on its growing presence in the U.S. ETF market, where it has made two acquisitions over the past few years that have turned it into the eighth-largest U.S. ETF sponsor. It rebranded the U.S.-listed Claymore funds it acquired as Guggenheim products and is rumored to be on the verge of doing the same with its Rydex funds.

“Claymore Canada brings a complementary set of ETFs to the world-class iShares range of products and enhances our ability to compete against other investment fund providers in Canada,” Bill Chinery, head of BlackRock Canada, said in a press release. The press release noted that the acquisition will more than double the presence of iShares ETFs in Canada. iShares is the world’s biggest ETF company.

ETF assets make up about 5 percent of Canada’s entire retail funds market, which the Canadian financial data provider Investor Economics Inc. estimates totaled C$832.6 billion at the end of June 2011. By comparison, ETFs now total about a tenth of the U.S. retail market. The BlackRock-Claymore deal means the new company’s ETF asset growth will almost surely accelerate, and it’s likely that BlackRock will also probably begin developing a family of traditional open-ended mutual funds in Canada.

Toronto-based Claymore Investments has a family of 34 ETFs and two closed-end funds across several asset classes that together amounted to C$7.0 billion in assets under management as of Dec. 31, 2011. Claymore is behind various ETFs and, on its website, claims it launched the first actively managed ETF in the world.

“We ... remain strongly committed to growing our ETF businesses based in the United States,” Todd Boehly, president of Guggenheim Partners, said in the press release.

For its part, BlackRock currently offers 48 iShares ETFs in Canada that represent C$29.0 billion in assets under management.

BlackRock’s purchase of Claymore is expected to be completed by the end of the first quarter of 2012, and should be “neutral to modestly accretive” to BlackRock’s earnings this year, meaning the acquisition should begin contributing to BlackRock’s bottom line in 2012.

BlackRock, a publicly traded New York-based company whose shares are traded on the New York Stock Exchange under the symbol “BLK,” is one of the world’s biggest asset managers. According to its website, it had $3.345 trillion in total assets under management as of Sept. 30 last year.

Guggenheim is a private company with headquarters in both New York and Chicago. It manages about $125 billion in assets. It acquired Claymore in July 2009, and Rydex in February 2010. As noted, the U.S.-listed Claymore products now have the Guggenheim name, and its Rydex products will take on the Guggenheim name perhaps as soon as sometime this month.

Guggenheim’s intention to sell its Canada-based operations first surfaced in a Bloomberg News report published in November.



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