On Thursday, Insurance giant New York Life said its New York Life Investment Management (NYLIM) unit, the company’s third party global asset management business, will acquire exchange traded funds provider IndexIQ for an undisclosed sum.
The deal is expected to close in the first half of 2015 and some analysts view New York Life’s overture for IndexIQ as a way of the former further boosting its presence in the ETF industry going forward.
IndexIQ will become part of New York Life’s MainStay Investments unit, a group that has $101 billion in assets under management across actively managed mutual funds. MainStay’s already established presence in the actively managed mutual fund space could be a sign it intends to use the purchase of IndexIQ to broaden its ETF reach. [New York Life Acquires Index IQ]
“Upon closing, Mainstay’s acquisition of Index IQ will add about $1.2 billion in ETFs, making it the 28th largest ETF provider according to etf.com data. Larger peers, such as iShares, Vanguard and State Street, collectively have $1.6 trillion in assets (more than 80% of the U.S market share) in mostly market-cap weighted equity and fixed income products. Meanwhile, Index IQ assets are in passive alternative strategies. The largest is the IndexIQ Hedge Multi-Strategy ETF (NYSEArca: QAI) an ETF that combines long/short, global macro, market neutral and other hedge fund styles. QAI has $940 million in assets, aided by the nearly $300 million of fresh money thus far in 2014. Alternative funds have been increasingly popular with institutional investors and financial advisors, as they seek to diversification away from traditional equity and fixed income investments,” said S&P Capital IQ in a research note.
Some mutual fund issuers arriving late to the ETF party have tried to get approval from the Securities Exchange Commission for actively managed non-transparent ETFs, though only Eaton Vance (NYSE: EV) has been successful, prompting speculation that ETF industry consolidation could rise as more mutual fund houses look easier paths to entry.
Notable is that Eaton Vance’s exchange-traded managed funds (ETMFs) are not true ETFs. Earlier this year, the SEC rejected applications for non-transparent actively managed exchange traded funds by Precidian ETFs Trust and Spruce ETF Trust, a unit of BlackRock (NYSE: BLK). [Exemptive Relief of Eaton Vance ETMFs]