Guggenheim said to eye Claymore and Rydex combo

Guggenheim Partners LLC is in talks about combining its former Claymore Group Inc. exchange-traded-fund business with its Rydex SGI business, according to people familiar with the situation. The merger, if completed, would result in the seventh-largest ETF provider in the United States, with $11 billion in assets, according to Morningstar Inc. Guggenheim bought Claymore in October 2009. In February 2010, the firm was the lead investor in buying Security Benefit Corp., which owns Rydex SGI, a provider of ETFs and mutual funds. Last September, Guggenheim re-branded the former Claymore business to become Guggenheim Funds Investment Advisors LLC At the time of that acquisition, Todd Boely, managing partner in the office of the chief executive of Guggenheim Partners, said that there were no plans to integrate the two ETF providers. He did say that “longer-term, we'll be looking at lot of things related to how to optimize the business.” As part of those talks, the firm is discussing integrating the two businesses to gain scale and allow its wholesalers to sell both ETFs and Rydex' mutual funds, sources familiar with the situation said. The challenge is that Guggenheim, though the lead investor in Security Benefit, either has to buy out the other investors or convince them to allow the integration, said a person familiar with the discussions, who asked not to be identified. Jeff Kelley, a spokesman for Guggenheim Capital Partners, didn't return calls seeking comment. Calls to Security Benefit were referred to Jeaneen Pisarra, a spokeswoman at Rydex, who declined to comment. If the integration does go through, the firm will combine the 350 employees on the Rydex side with the 200 employees at Guggenheim Funds Investment Advisors.

'SCALE BUSINESS'

There is no word yet on the roles that Rydex SGI chief executive Rich Goldman and Donald Cacciapaglia, president and chief operating officer of Guggenheim's investment management business, would play in the combined unit. Combining the two businesses makes a lot of sense for Guggenheim because it would create a bigger business and allow its wholesalers to sell Rydex and Guggenheim ETFs, as well as Rydex mutual funds, said Scott Burns, director of ETF research at Morningstar. Rydex, with $8 billion in ETF assets and 0.76% of ETF market share, is the ninth-largest seller of ETFs. Guggenheim, with $3 billion in assets, has 0.34% market share and is ranked 14th, according to Morningstar. “ETFs are ultimately a scale business, so the more scale you have, the better you will be,” Mr. Burns said. E-mail Jessica Toonkel at jtoonkel@investmentnews.com.