Janus ETP strategy takes shape with VelocityShares acquisition.
Janus Capital Group, the Denver-based fund firm in the news for hiring bond-investing superstar Bill Gross, is now acquiring exchange-traded product firm VelocityShares, a firm known mostly for its sophisticated products designed to manage market volatility. The transaction includes an upfront cash payment of $30 million.
Janus appears to be making the dramatic move to buy its way into the rapidly growing world of exchange-traded funds. The mutual fund firm has already obtained permission from the Securities and Exchange Commission to market active as well as passive ETF strategies.
“This acquisition positions Janus within the rapidly growing rules-based and active ETF universe, enhancing the customized solutions we can provide to our clients and enabling us to work with the growing segment of financial advisors and institutions focused on these instruments,” Janus Chief Executive Officer Richard Weil said in a press release.
VelocityShares has a lineup of 20 exchange-traded products, most of them ETNs that are actually debt obligations with return streams designed around particular ruled-based indexes. But the firm more recently has begun to issue ETFs, which, unlike ETNs, own actual assets. The firm, which opened its doors in 2009, now has total assets of $2.13 billion, according to data compiled by ETF.com Analytics.
The fact that Janus is acquiring a company with a dual ETF/ETN profile suggests that Janus may be planning a move into exchange-traded products that is at once broad and relatively sophisticated.
It wasn’t immediately clear from the press release what terms of the deal were apart from the $30 million upfront cash payment. The acquisition is expected to close in the fourth quarter of 2014, and is subject to certain conditions, including regulatory approval.
‘Big News Indeed’
Matt Hougan, president of ETF.com, sees the move as a significant strategic gesture that signals big fund companies are, one by one, realizing that without an ETF-related arrow in their product-mix quiver, they simply won’t be viable competitors in the future.
“Now we see that that dam has been breached,” Hougan said in interview. “Janus has joined everyone from Franklin to Goldman Sachs to J.P. Morgan to BlackRock in realizing that you need an ETF strategy to compete in the ’funds market’ of the future. They've chosen to do it via acquisition, which is interesting.”
Hougan said that while VelocityShares is fine in and of itself, Janus is looking well beyond the tightly focused franchise VelocityShares has developed. Even VelocityShares, as noted, has been expanding its footprint.
“My guess is that a firm like Janus isn’t buying VelocityShares solely because it wants to turn VelocityShares’ $16 million revenue line into a $30 million revenue line by getting more people to buy volatility products. My guess is that they see this as a way to enter the ETF space more broadly, and that is big news indeed.
“Throw Bill Gross into the mix and it gets even more interesting.”