New York Life's acquisition of IndexIQ, announced jointly by the firms' top executives Thursday, yet again pairs a massive money manager with a far-smaller ETF manager.
The deal, which is expected to close in the first half of next year, marks the first foray into ETFs for the MainStay brand.
In an interview with
InvestmentNews Thursday, executives touted the benefits of combining alternative ETF investment strategies with a sales force plugged into financial advisers.
“When we're able to turn on that distribution force to a product line like this, it can be powerful,” said Drew Lawton, chief executive of New York Life Investment Management. “We see fairly expansive opportunity in the ETF space.”
The insurance company's asset management unit includes more than $350 billion in assets, according to the firm. Its MainStay brand accounted for about $81 billion in mutual fund assets in October, according to Morningstar Inc.
With the deal, the firm captures an ETF sponsor with about $1 billion in ETFs. Most of those assets are concentrated in one fund, the IQ Hedge Multi-Strategy Tracker ETF (QAI).
Terms of the transaction were not disclosed.
Small ETF firms have drawn tremendous interest as potential partners and acquisition targets by larger asset managers. Janus Capital Group Inc.
announced a deal in October to acquire exchange-traded product firm VelocityShares for at least $30 million.
ETFs are among the fastest-growing products in asset management. And larger firms without a strong presence are interested in ETF firms that have made more progress toward being able to launch new funds in the future, according to Todd Rosenbluth, who directs fund research at S&P Capital IQ.
“The biggest win for them is the exemptive relief for both active and passive strategies,” said Mr. Rosenbluth, referring to the type of regulatory approvals needed to launch ETFs, which IndexIQ has successfully obtained. “It is a door opener for MainStay and New York Life. How they execute is going to be important because competing with the iShares, State Streets and Vanguards of the world is a challenge.”
Launching ETFs involves a different process than launching mutual funds. It requires both regulatory approvals and relationships with a unique grouping of third parties who support those products throughout their life cycle.
The firm will have to distinguish itself among advisers by creating products that are “unique enough” to gain traction, according to Mr. Rosenbluth.
IndexIQ's most popular strategy attempts to bring hedge-fund-style investing to the mass market, while MainStay has popularized boutique strategies like the Marketfield Fund (MFADX), which takes long and short positions in stocks.
In October, Reuters
reported that the Goldman Sachs Group Inc. was “in discussions” to acquire IndexIQ, citing unnamed sources. New York Life, Goldman Sachs and IndexIQ declined to comment on those reports.
