Report: Grail To Be Bought By Ameriprise

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Grail Advisors, the San Francisco-based pioneer of actively managed ETFs that said it was on the brink of liquidation at the beginning of the year, will be acquired by Ameriprise, the financial advisory business that was once owned by American Express. Terms weren't disclosed.

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. It shuttered a pair of ETFs last summer.

Grail will join Columbia Management, the mutual fund family Ameriprise acquired from Bank of America, as part of its proprietary lineup of products. 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.


Officials at Grail and at Minneapolis-based Ameriprise weren't immediately available to confirm the report, which said an announcement of the transaction is likely to be imminent. It wasn't immediately clear when Grail and Ameriprise expect the acquisition to be completed.

In the acquisition, Ameriprise will gain Grail's so-called exemptive relief, which will allow it to bring more actively managed mutual funds to market, should it choose to do so. Still, it's not clear what Ameriprise intends to achieve with its acquisition. It could be a defensive move aimed at getting a start in the ETF business, or it could be designed to leverage the Columbia franchise into a much larger ETF platform.

Whatever Ameriprise intends to do with Grail, past history suggests it will have a tough row to hoe on a number of levels. To begin, actively managed ETFs have yet to truly take off. They constitute far less than 1 percent of the nearly $1.1 trillion in total assets in U.S. exchange-traded products. 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.

Additionally, 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.

A Fresh Chance?

Grail said in a regulatory filing in January that it had signed a letter of intent to be acquired by an unnamed party. In that filing, it noted that consummation of any transaction didn't guarantee the survival of its existing funds, which depended on the buyer's plans.

It wasn't immediately clear if the entity it was referring to in that filing was Ameriprise.

Grail's five remaining ETFs and their assets as of April 13 were:

  • 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

If and when the deal goes through, shareholders in each of these ETFs will have to approve the investment manager's continued role as advisor. 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.

Don't forget to check IndexUniverse.com'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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