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
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
- 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
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
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
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