Asset Manager TCW Acquires Engine No. 1’s ETF Business

TCW Group, a manager of dozens of mutual funds, is buying Engine No. 1’s ETF business, accelerating its move into exchange-traded funds as those investments continue to take market share from mutual and open-end funds. 

Los Angeles-based TCW, with $210 billion in assets under management, will be acquiring all of San Francisco-based Engine No. 1’s Transform ETF platforms, which includes three ETFs managing $640.7 million. The funds include the active, thematic Engine No. 1 Transform Climate ETF (NETZ), the Engine No. 1 Transform Supply Chain ETF (SUPP) and the Engine No. 1 Transform 500 ETF (VOTE).  

While ETF assets at $6.9 trillion are less than half the of $17 trillion held in mutual funds, exchange-traded fund assets are growing at the expense of their larger cousin. ETF assets rose 2.5% in May, while mutual funds lost 1.1%, according to a Cerulli Edge report. That month, ETF inflows were $33.4 billion, while mutual funds had $56 billion in outflows. 

Engine No. 1 is known for its activism, and last year elected three directors to ExxonMobil’s board after persuading shareholders that the company was not meeting climate standards. 

The deal should close in the third quarter of 2023, subject to shareholder approval. Engine No. 1’s ETF portfolio managers and staff will become part of TCW.  

Katie Koch, TCW president and CEO, said in a statement that the “acquisition signifies an early chapter in TCW’s next stage of growth.”  

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Chris James, founder and chief investment officer of Engine No. 1, said the company was built on the idea that there is incredible investment opportunity in solving large-scale problems: “Our thematic EFTs are constructed around that value creation principle.”  

The Engine No. 1 procurement is the latest in TCW’s expansion of investment solutions. The company announced earlier this year a strategic partnership with Lakemore Partners to support the growth of TCW’s collateralized loan obligation platform.  

TCW is a prominent global asset management firm with an extensive range of products across fixed income, equities, emerging markets and alternative investments.  

Contact Terry Wooten at [email protected]