The world's largest asset manager,
BlackRock (
BLK
)
, announced the acquisition of Europe's fifth largest exchange
traded fund business unit of
Credit Suisse (
CS
)
. The price of the deal, which is expected to close by the end of
second quarter, was not disclosed by BlackRock.
This business unit purchase is yet another addition to
BlackRock's plans to bring together smaller asset managers. The
acquisition further aims at strengthening its position in
Switzerland and Europe overall, hopefully providing a boost to
its overall growth after losing a portion of its market share in
the U.S. to Vanguard (
Vanguard Ends 2012 with a Bang, Cuts Fees on 22
ETFs
).
On the other hand, the purpose of Credit Suisse to sell the
unit entails the raising of $16.5 billion in capital, which it
announced in July. This also included issuing convertible bonds
and prime Zurich real estate and other assets sales.
However, Credit Suisse through Private Banking and Wealth
Management division will continue to be a large player in the ETF
world. The firm will assist BlackRock in expanding the ETF
product offering.
The Credit Suisse unit has $17.6 billion assets under
management spread across 58
ETFs
on five exchanges. BlackRock currently has approximately 42%
share in $331 billion European ETF market (see
Three European ETFs with Incredible 2012
Gains
).
With this purchase, BlackRock share in the European ETF market
will increase over 47%, and cement its dominant position in that
region of the world as well. The acquisition would result in
widening the ETF base in Europe to the largest ETF platform
offering products across different classes and commodities.
In the coming years, the European ETF market is expected to
show strength attributable to the fact that more financial
advisors are shifting from charging commissions toward fee-based
businesses.
BlackRock is a leader in the ETF industry and its track record
appears to be quite impressive. This is BlackRocks's second
attempt to expand its footprint and ETF offering in the
international ETF market in the last year.
Before Credit Suisse's unit purchase, BlackRock had acquired a
Canadian ETF operation. It was a Toronto-based Claymore
Investments, and was from Guggenheim Partners LLC. The
acquisition was made in March by BlackRock and included 34 ETFs
with more than C$6.9 billion assets under management (
BlackRock to Buy ETF firm Claymore
).
Exchange traded funds are low margin business and its growth
is highly dependent on adding scale to the business. These
acquisitions by asset managers assist in scaling the business
platform. In fact, the ETF industry could see similar
acquisitions made by bigger asset houses in order to scale their
business.
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