If you own an RIA managing ETF portfolios for clients, don't be shocked
if the next rap-tap on your door is from a private equity firm looking to buy you out. Reuters
reporter Jessica Toonkel writes that one of the challenges for firms considering investing in ETF portfolio providers is determining if they have the resources to be successful.
A larger point that she does not touch on is that the trend underscores that ETFs are not just competing for mutual fund firm's customers, they are also competing for dollars from a limited pool of backers.
Those private equity firms seeking to make an ETF play through RIA shops include FTV Capital
, Aquiline Capital Partners
, Century Capital
and Grail Partners
, writes Toonkel.
Those firms are savvy enough to seek targets with distribution.
"You can have a great product but if you don't understand distribution you will have $100 million in assets and low profitability," Ben Cukier
, a partner at private equity firm and investor in ETF providers FTV Capital
, told Reuters
Private equity firms, after all, are looking for growth. Distribution is the biggest growth factor acquiring these small RIAs can provide.
The movement to invest in these firms is surely not yet at its zenith, Toonkel reports. With most ETF providers having a limited performance record, many private equity firms are staying away from these moves until the market is more proven.
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