Ameriprise’s Columbia To Acquire Grail


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 release.

Ameriprise offers more than 2,000 funds to its clients through a network of over 10,000 financial advisors, according to the company's website.

Challenges Ahead

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 ETFs.

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 October 2009.

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), $1.66 million
  • Grail McDonnell Core Taxable Bond ETF (NYSEArca:GMTB), $2.53 million
  • Grail McDonnell Intermediate Municipal Bond ETF (NYSEArca:GMMB), $2.48 million
  • Grail RP Focused Large Cap Growth ETF (NYSEArca:RWG), $11.47 million
  • 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 currencies.

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's ETF Data section.

Copyright ® 2011 Index Publications LLC . All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs

Referenced Stocks: GMMB , GMTB , GVT , RWG , SEA



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