LONDON (Reuters) - Legal & General (L&G) (LGEN.L), the owner of Britain’s biggest fund manager, has staked its claim for a slice of the growing market for exchange-traded funds (ETFs) with a deal to buy Europe-focused platform Canvas.
Legal and General Investment Management (LGIM), which runs a third of its $1.2 trillion (£909 billion) in assets in index funds, but none in ETFs, will acquire the platform and $2.7 billion in assets from ETF Securities for an unspecified sum, L&G said on Wednesday .
The deal comes amid growing demand from fee-conscious investors to buy cheaper index-tracking products, and follows recent moves from rivals including Invesco, Vanguard and Wisdomtree to expand operations.
Vanguard, one of the world’s biggest providers, has said continental Europe will be a key growth market in the future, fuelled in part by new regulations aiming to remove inducements for financial advisers to push higher-cost funds.
Unlike straight index funds, ETFs are classed as an equity and traded on a stock exchange, making it easier for investors to buy and sell.
“We thought the time was right to enter ETFs now,” Chad Rakvin, global head of index funds, told Reuters. “Especially with ETFs becoming more efficient (and) our clients starting to understand them better.”
The deal for the UK and Ireland-based Canvas platform will help LGIM break into the booming European ETF market via the 14 countries in which it is licensed for distribution. L&G did not disclose a value for the deal.
As part of the deal, the chief executive, chief operating officer and a team of product specialists, portfolio managers, legal and compliance staff will move across to LGIM when the deal closes, likely in the first quarter of 2018, Rakvin said.
“The ETF market is one of the fastest growing segments in asset management,” said Mark Zinkula, CEO of LGIM.
“A number of long-term macro trends, including the increasing use of passive vehicles and the drive to digitalisation, will lead to a growing demand for ETF products.”
Investors have increasingly put their money into exchange-traded products and funds in recent years, with the global market reaching a record $4.6 trillion at the end of October.
While European ETF assets are just a small slice of that, at around 550 billion euros, Morningstar data to end-2016 showed, the pace of growth is higher and Rakvin said he expected LGIM’s assets to grow.
“This year alone, $95 billion has gone into European ETF products, so we do expect it to be a more material part of our growth going forward,” he said, adding he was “open” to further bolt-on acquisitions.
Editing by Mark Potter