FNZ acquires YieldX to accelerate US growth

YieldX, a Miami-based provider of fixed-income portfolio management technology, is being acquired by FNZ, an international company that provides technology, infrastructure and investment operations to wealth management firms.

YieldX’s technology will be integrated into FNZ’s existing product to enable advisors to scan the universe of fixed-income securities globally and identify a fit for desired term and yield. Terms of the deal were not disclosed, and a spokesperson for FNZ declined to comment on the value or details of the transaction.

In February 2022, FNZ raised $1.4 billion in a round of fundraising led by Canada Pension Plan Investment Board and Motive Partners that valued the company at $20 billion. It has $1.5 trillion in client assets under administration, and works with 650 large financial institutions and 8,000 wealth management firms across 21 countries.

Acquiring YieldX can accelerate FNZ’s growth and market share in the U.S., Tom Chard, CEO of FNZ North America, said in a statement. YieldX’s team will join FNZ, and CEO Adam Green will become FNZ’s CEO of asset management. YieldX president and chief innovation officer Steve Gross will join as FNZ’s head of asset management strategy.

“We have a joint vision of opening up wealth by transforming the wealth management industry through more transparent, accessible, and personalized technology solutions. YieldX’s solutions perfectly complement our existing strengths and will further differentiate our offering for the benefit of all clients,” Chard said in a statement. “Like us they are highly innovative, customer obsessed and are an invaluable addition to our team.”

FNZ’s U.S.-based customers include Vanguard and Envestnet, the latter of which announced a partnership with FNZ in October to develop an RIA custodian. That project is on track to reach the market in the second half of 2023, according to the FNZ spokesperson.

“Additionally, the partnership will enable unique insights and experiences generated by Envestnet Data & Analytics’ Wealth Data Platform (WDP) to be integrated as part of FNZ’s platform and distributed to our global customer base, beginning this year,” the spokesperson said in an email.

YieldX made headlines earlier this week when it partnered with Principal Asset Management and Smartleaf Asset Management to launch the industry’s first fixed-income direct indexing product. The acquisition will only accelerate that partnership, Green said.   

“With FNZ’s significant resources and global footprint, we believe we will be able to more quickly drive adoption of customized direct indexing in fixed income across the marketplace,” he added.

The acquisition is especially timely given recent hikes in the federal funds rate and corresponding flows in yield-chasing strategies, said Nikhil Sharma, managing principal and U.S. head of digital wealth at consultancy firm Capco. It's also in line with a current trend in fintech M&A that aims to offer advisors more depth of service in certain areas.

“Wealth managers are always looking for new ways to engage clients around innovative and digital-first products. By leveraging the expertise of industry leaders in their respective fields, those wealth managers are able to provide superior service, spend more of their time on client-facing activities, and ultimately win market share,” Sharma said in an email. “In the YieldX case, it’s the specialization and expertise in fixed income portfolio management & direct indexing technology and their integration into wealth management.”