Tag Archives: Barclays

Claymore Cashes Out

It looks like the rumors were true.

For about year, rumors swirled around that ETF firm Claymore Securities had put itself up for sale. Well, it finally found a buyer. Guggenheim Partner, a privately held institutional money manager, on Friday agreed to acquire the entire Claymore Group. The Lisle, Ill., company includes the ETF firm Claymore Securities, as well as Claymore Advisors and Claymore Investments in Canada. All will become wholly owned subsidiaries of Guggenheim Partners. Terms of the transaction were not disclosed. The deal is expected to close at the end of the third quarter.

The deal gives Guggenheim, an institutional financial services firm with more than $100 billion in assets, its first retail operation. According to the National Stock Exchange, as of June 30, Claymore was the 13th-largest U.S. ETF provider, with 35 ETFs and more than $1.6 billion in assets under management. With more than $740 million in assets, its largest fund is the Claymore/BNY BRIC ETF (EEB)

In 2001 Claymore began as a creator of unit investment trusts (UITs) and closed-end funds. It began selling ETFs in 2006. At the end of the second quarter, all the Claymore entities combined managed $12.9 billion in assets, with more than $2 billion in Canada.

For more than a year, rumors have abounded that Dave Hooten, the Claymore Group chairman and chief executive, was looking to cash out of the firm he created, in a fashion similar to his old friend and ETF rival, Bruce Bond, the founder of PowerShares. In 2006, mutual fund giant Invesco bought PowerShares for $100 million and the possibility of contingency payments.

Claymore created some of the most original ETFs in the industry, such as the Claymore/KLD Sudan Free Large-Cap Core, the Claymore/Clear Global Vaccine Index and the Claymore/NYSE Arca Airline ETF (FAA). But many funds had a hard time acquiring assets because of their niche appeal. Claymore became the first ETF firm to close funds when it shut the Sudan and Vaccine funds along with nine others in February 2008.

Most ETFs are index funds. And Claymore has struggled because of the indexes its funds track. Unable to link up with a major index provider and working in an industry that makes it difficult for two funds to track the same index, Claymore’s basic large-cap, small-cap, value and growth funds failed to attract a huge audience. Claymore’s biggest index providers are Zacks and BNY/Mellon Bank.

While the Claymore deal comes on the heels of Blackrock’s purchase of iShares, Barclays ETF company, the trend isn’t obvious. Barclays, a giant British bank, was forced to sell its market-leading ETF firm, a huge moneymaker, in order to avoid a British government takeover due to depleted cash reserves from the financial crisis. While Claymore didn’t give a reason, a few come to mind.

1) The current market environment has hurt all fund companies. Over the past year, many investors pulled out cash and remain fearful of putting money back in the market.

2) The ETF business has been a struggle for all small independent firms. Unable to latch onto a major index provider, all the independent firms, like Claymore, have needed to create niche products. And while some have been great ideas, they nonetheless have had to work harder to attract attention to these less than obvious portfolio ideas. In a market full of fear, investors don’t want to invest in offbeat ideas. They tend to gravitate to conservative and well-known indexes. Many small ETF firms have gone out of business over the past two years.

3) In light of the combination of the above reasons, I think the upper management of Claymore wanted to cash out while their firm still had a good reputation and a sizeable amount of assets.

What this all means for investors remains unclear.

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BGi’s Diamond Scores $36.5 Million; Vanguard Investors Pissed Off

Here’s a round-up of second day stories about the Blackrock purchase of BGI.

The Wall Street Journal says more than 400 top executives at Barclays will walk away from the deal pocketing a total of $630.3 million. It seems there was some sort of unusual management incentive plan in place at BGI that would have started to expire in 2010. They needed to do something quick to cash out. Barclays President Robert Diamond alone will walk away with $36.5 million.

WSJ’s Jason Zweig reports that Vanguard’s investors are furious with the mutual fund/ETF company for even making a bid on iShares. Zweig says this could have been a good move for Vanguard and I agree. Already the No. 3 ETF provider, Vanguard could have become the market leader. More important, Vanguard would have probably cut the expense ratios on the ETFs, which could have brought in even more investors. Few people realize that Vanguard doesn’t have an ETF to partner with its S&P 500 fund. Vanguard came to ETFs late in the game and wanted to make an ETF for its flagship index fund. However, S&P had already given an exclusive license to BGI for the iShares S&P 500 Index (IVV).This would have given Vanguard the S&P 500 ETF they’ve always wanted. Also, S&P sued Vanguard over basing the ETF on the index without giving S&P any additional licensing money That full story is in ETFs for the Long Run.

The Financial Times says Larry Fink, Blackrock’s CEO, has been trying to buy BGI for eight years, and capitalized on the financial crisis to make his dream come true.

Reuters’ Svea Herbst-Bayliss suggests the BGI deal will spark a buying spree as envious rivals figure out how to compete. Bank of New York Mellon (does that taste as good as a honeydew melon?) is expected to be the next buyer. BNY already plays a big part in the ETF industry as a trustee and custodian of many funds. BNY is the trustee and administrator of the second ETF, the MidCap SPDR (MDY).

DealJournal’s Michael Corkery says besides CVC, the big loser is Goldman Sachs, which advised CVC.

Jim Wiandt of IndexUniverse.com says by using an ETF company to create the largest asset manager in the world is a huge boost for the ETF industry and proves how big basis-point-linked passive assets have gotten. He asks a lot of questions, but doesn’t give any anawers. Questions like will Blackrock keep the ETF expense ratios low and what does this mean for the active ETFs?

What are your thoughts? I would love to hear them.

Blackrock Buys BGI for $13.5 Billion

In a deal sure to create major changes in the ETF industry, asset-management giant Blackrock agreed to buy Barclays Global Investors (BGI) from Barclays PLC for $13.5 billion late Thursday.

BGI, which coined the term exchange-traded fund, has been the industry’s market leader since the emergence of its iShares family of ETFs in 2000. It remains the industry leader with more funds than any other ETF sponsor and a little less than 50% market share.

With more than $2.7 trillion in assets under management, The Wall Street Journal says this creates a “money-management titan twice the size of its closest competitor,” such as State Street, another ETF provider, and mutual fund giant Fidelity Investments.

The most interesting tidbit comes out of The New York Times. The Times reports Barclays’ president Robert Diamond had first discussed a potential deal with BlackRock approximately seven years ago, but decided the timing was not right.

My favorite nugget, the boys at BGI won’t have to change the initials on their luggage. The firm will continue to be called BGI as the new company takes the name BlackRock Global Investors.

BlackRock Rumored to Buy BGI; BNY Could Enter the Fray

Kudos to Douglas Appell and Pension & Investments for breaking what may be the biggest scoop of the ETF industry this year.

Pension & Investments reported just before the market closed Friday that giant money manager BlackRock made a late day play for Barclays Global Investors. Unnamed sources say, “BlackRock is likely to announce an agreement to buy BGI, creating the world’s biggest institutional money manager.” The source expects the announcement within days. BGI owns the iShares exchange traded fund business.

Big British bank Barclays put the unit up for sale earlier this year in an effort to raise capital and stave off the British government either investing in or nationalizing the bank. CVC, a British private equity firm, offered in April to buy iShares for $4.2 billion. BlackRock is expected to trump that with a $10 billion offer. CVC holds the option to make a counter bid. But a source not directly involved in the deal said CVC wouldn’t be able to top the BlackRock offer.

I love how every story crediting Appell calls him a veteran journalist. What makes one a veteran journalist vs. a regular journalist? I’ve heard of rookie journalists. But after the first year, aren’t all journalists “veteran journalists”?

This morning, the New York Times confirmed the story. Negotiations appear stuck on the issue of price. Barclays wants “more than $12 billion.” Vanguard Group, the providers of a large family of ETFs and mutual funds, had previously been mentioned as a buyer.

This story cleared up one question in many people’s minds: Is this for iShares alone or all of BGI. The Time says all of BGI, which operates in 15 countries with more than $1 trillion in assets under management. If the deal goes through, Barclays could end up with a seat on BlackRock’s board.

The Financial Times confirms the story and raises the ante. FT.com reports Bank of New York Mellon is about to stage an 11th -hour challenge for BGI. FT predicts the deal could come in around $13 billion, with Barclays taking a 20% stake in Blackrock.

I want to know where is Fidelity, the mutual fund giant? Fidelity missed the boat the first time and here’s its chance to be one of the largest in the mutual fund and ETF businesses in one fell swoop.

PowerShares/Van Eck Tie for Most Innovative U.S. ETF

Invesco PowerShares and Van Eck’s Market Vectors shared the 2008 award for the Most Innovative ETF the Americas at the 5th annual Global ETF Awards recently. Daiwa FTSE Sharia Japan 100 won Most Innovative ETF in Asia, while db x-trackers and Lyxor Asset Management tied in Europe.

The actual ETFs weren’t listed, as voters aren’t required to mention the fund’s name, just the firm’s. It’s probably just as well. I surmise that PowerShares won for producing the first family of active ETFs in the U.S. rather than any particular fund. PowerShares’ Active Alpha Multi Cap Fund (PQZ), Active AlphaQ Fund (PQY), Active Low Duration Fund (PLK) and the Active Mega-Cap Fund (PMA) were all launched on April 11, 2008. Does any one fund stand out as more innovative than the others? I don’t think so. I suggest they won more for bringing the active concept to the U.S. market.

PowerShares actually didn’t launch the first active ETF. It had been in a race to come out with the first active ETF, but lost to Bear Stearns by just a matter of weeks. However, when Bear Stearns died, so did its active fund, leaving PowerShares with the first viable active ETFs in the U.S.

Meanwhile, Market Vectors launched five ETFs last year. If I had to guess, I would say they won for their funds covering frontier markets, Africa Index ETF (AFK) and Gulf States Index ETF (MES).

The SPDRs brand of ETFs from State Street Global Advisors again won Most Recognized ETF Brand in the Americas. This is probably due to the fact that the SPDR (SPY) was the first ETF and is the largest and most liquid ETF on the U.S. market. But I’m sure a lot of this has to do with the ad campaign for Select Sector SPDRs.

These commercials, which run often on CNBC, show spiders building webs in the industry-signifying shapes such as an oil derrick for the Energy Select Sector SPDR (XLE), a hard hat for the Materials Select Sector SPDR (XLB) or light bulb for Utilities Select Sector SPDR (XLU). The ad makes a really good connection between the name SPDR and that fact that these are funds to invest in. SPDR also surprised many people by winning Most Informative Website, SPDRS.com. The site is a big advancement over the previous incarnation and much easier to use.

The Global ETF Awards are like the Oscars of the ETF industry. They are unique on Wall Street, because as far as I know these are the only awards in which an industry is invited to vote on itself. This makes winning extremely special because it’s your competitors who say you’ve done a good job, rather than a few individuals.

Some people who read my previous note about the awards seemed to think the conference and awards deal only with the international market. That’s not right. As I clearly stated previously, it’s the only conference that deals with BOTH U.S. AND INTERNATIONAL issues. Nearly every company in the U.S. ETF industry attended and many had representatives speaking on panels. However, unlike other ETF conference I’ve attended, which are completely focused on the U.S., this conference also addresses issues affecting ETF providers outside the U.S.

It was a great opportunity to network with not just State Street, Bank of New York Mellon, ProShares, PowerShares and Barclays, to name a few, but also representatives from the Bank of Ireland, France’s Lyxor, the London Stock Exchange and China Asset Management.

The conference and awards dinner are presented by ExchangeTradedFunds.com and were held at the Grand Hyatt Hotel in New York City.

For the complete list of winners go to ExchangeTradedFunds.com.

iShares Might Really be Sold

It looks like iShares might really be sold.

“Barclays has started exclusive negotiations with CVC Capital Partners, the private equity group, to sell the exchange traded funds business of its iShares subsidiary in a deal expected to be worth about £3bn,” reported the Financial Times.

This comes on the heels of the FT’s report that Barclay’s was in talks with three suitors.

I’m still digesting this. More to come.

Barclays Looking to Sell iShares

Barclays PLC shares is trying to sell its iShares exchange-traded-fund business in an effort to raise the necessary money to avoid being taken over by the British government. However, the list of possible buyers is very short.

More on this later.

Here are reports from The New York Times and The Wall Street Journal.