RevenueShares, the ETF provider with a six-fund lineup of
revenue-weighted strategies, has partnered up with a China-based
venture capitalist firm in a deal that looks to not only help the
ETF sponsor expand its footprint in the U.S., but also to plant the
seeds of ETF development in China.
Suzhou Industrial Park Kaida Venture Capital-a Chinese private
equity firm specializing in funding high-tech and financial
companies across China-is paying $7 million for a 22 percent stake
in VTL Associates, RevenueShares' parent company, VTL's Chairman
Vince Lowry told IndexUniverse.
The deal really serves a twofold purpose:The money is designated
primarily to boost RevenueShares' marketing and sales
efforts-something the company has done very little of in the past
two years or so, Lowry said. RevenueShares launched its first
five year ago.
But VTL's willingness to give up a stake to a Chinese venture
capital firm also reflects the firm's commitment to bringing
RevenueShares ETFs to China-an ETF market that is barely in its
infancy, Lowry said.
Just last week, a Shanghai-listed ETF targeting the same
Nasdaq-100 Index that underlies the $35 billion U.S.-listed
PowerShares QQQ Trust (NasdaqGM:QQQ) launched in China, sponsored
by Guotai Asset Management-a move that Lowry says speaks to the
growing Chinese opportunity for ETF sponsors.
Growing Its Lineup And Presence
Coming off the fifth anniversary of its first ETFs launched in
February 2008, RevenueShares found itself at an inflection point
where it had to ramp up marketing and sales efforts given increased
competition. But to do so, it needed outside investment.
"When we first launched our ETFs in February 2008, we caught
just about the last tick up in the market, and the next three or so
years were very tough markets to work in," Lowry said. "But we
still managed to get more than $600 million in assets, and now
those assets are at about $530 million."
The firm, which also has about $550 million in separate-account
revenue-weighted strategies for large pension plans, manages about
$200 million for other ETF companies-such as Yorkville, the firm
behind the Yorkville High Income MLP ETF (NYSEArca:YMLP), and a few
others, Lowry said.
"In all, we have about $1.2 billion under discretionary
management and about a little over $1 billion is RevenueShares
[ETFs and SMAs]," he said. "We are now looking for seed capital
because most of that has been funded by VTL itself up to now."
"Unlike the rest of our competition, it was all financed by us
internally," Lowry noted. "We noticed our competitors have been
able to really ramp up their offerings and do a lot more marketing
than we have. We really haven't done much marketing at all for the
last two years."
The search for a partner started domestically, but VTL says that
while it talked to a lot of U.S. companies, it failed to find
someone who shared its vision. It was then that VTL was introduced
to the Chinese private equity group, which Lowry said immediately
"Growing the market in China is one of the major reasons we
chose them as partners," Lowry said. "They think Chinese investors
will really embrace ETFs, particularly revenue-weighted. We were
willing to give up part of our company for an opportunity to get
into that market."
Lowry himself is headed to China sometime this summer to promote
the idea, sponsor seminars and reach out to Chinese investors with
the goal of expanding understanding about ETFs.
Chinese Investments Looking For US Opportunities
It's worth noting that this deal is also emblematic of the
Chinese firm's intention to expand into U.S.-based growth
It's been widely reported recently that many Chinese firms and
Chinese government institutions have been looking for investment
opportunities in the U.S. as they look to diversify exposure away
from U.S. debt.
RevenueShares, as noted, currently sponsors six ETFs with a
combined $530 million in total assets under management. Its biggest
strategy is the RevenueShares Large Cap ETF (NYSEArca:RWL), with
$184 million in assets.
The firm, which launched its first ETF in 2008, is known for
reweighting popular S&P indexes by top-line company revenues
rather than by market capitalization. And it said it has more
strategies it's getting ready to put in the pipeline.
VTL, the parent company, is a developer of custom indexes in
equities as well as fixed income.
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