Columbia Management, the unit of Minneapolis-based financial
advisory firm Ameriprise, agreed to acquire Grail Advisors, the
purveyor of actively managed ETFs, to gain a foothold in the world
of active ETFs. Terms weren't disclosed.
"This jump starts our entrance into active ETFs," Colin Moore,
Columbia's chief investment officer, said in a press release. "It
will enhance our already deep product line-up and allow us to reach
even more investors with our broad investment management
capabilities. We intend to utilize this acquisition to build
an extensive offering of actively managed ETFs over time."
The acquisition-first reported in InvestmentNews and according
to people familiar with the negotiations-would breathe new life
into Grail's ambitions of bringing actively managed ETFs to market.
Grail has about $23 million in assets in its five remaining
actively managed ETFs, up from $20.3 million at the end of 2010,
according to data compiled by IndexUniverse.
San Francisco-based Grail said in a regulatory filing on Jan. 5
that it was on the brink of liquidation. The company, which
shuttered a pair of ETFs last summer, hadn't been terribly
successful in attracting major assets. The nearly $1.1 trillion now
in ETFs is mostly in index funds, with the active portion making up
well under 1 percent of total assets.
Columbia's president, Mike Jones, said his company intends to
work with its distributors to integrate Grail's offerings into its
marketing efforts. Columbia is the seventh-largest U.S. investment
manager, with $355 billion in assets at the end of 2010.
"We offer a wide range of product solutions that is strengthened
by the addition of active ETFs," Jones said in the same press
Ameriprise offers more than 2,000 funds to its clients through a
network of over 10,000 financial advisors, according to the
In a related development, RiverPark Advisors, now the
subadvisory on two of Grail's five ETFs, acknowledged that it will
no longer be the subadvisor on two of Grail's five remaining
Indeed, when the transaction closes, shareholders in each of
these ETFs will have to approve new advisors to the fund,
reflecting the new ownership. That's standard operating procedure
in any fund-company merger.
All of the iShares ETFs, for example, underwent such votes
without a hitch after the world's biggest ETF company was acquired
by BlackRock, the biggest money management firm globally.
Claymore wasn't so lucky after it was acquired by Guggenheim in
In an ETF industry first, one of its funds, the Claymore
Shipping ETF (NYSEArca:SEA), had to be shuttered because the
company failed to obtain a quorum of required votes. A new version
of the fund, which has since been renamed the Guggenheim Shipping
ETF (NYSEArca:SEA), relaunched in June of 2010.
Grail's five remaining ETFs and their assets are:
- Grail American Beacon Large Cap Value ETF (NYSEArca: GVT),
- Grail McDonnell Core Taxable Bond ETF (NYSEArca:GMTB), $2.53
- Grail McDonnell Intermediate Municipal Bond ETF
(NYSEArca:GMMB), $2.48 million
- Grail RP Focused Large Cap Growth ETF (NYSEArca:RWG), $11.47
- Grail RP Growth ETF (NYSEArca:RPX), $4.89 million
Logistical Head Winds
Whatever Ameriprise intends to do with Grail, past history
suggests it will have a tough row to hoe on a number of levels.
There's the problem of active ETFs that haven't truly taken off.
Moreover, active equity ETFs are themselves a small piece of the
already-small sum invested in active ETFs. Indeed, the most popular
active strategies so far have been focused on bonds and on
Bill Thomas, Grail's CEO, linked some of the asset-gathering
challenges active equity ETFs have faced with a post-crash
reluctance among investors to take on too much risk.
On a corporate and strategic level, past acquisitions of ETF
businesses by mutual fund firms suggest that whatever Ameriprise
hopes to achieve, it's likely to take some time.
Invesco took a while to integrate the PowerShares ETF business
into its suite of investment products, and some of the kinks in
Guggenheim Partners' buyout of the Rydex/SGI ETF franchise are
still being worked out.
Don't forget to check IndexUniverse.com's ETF Data
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