Invesco is in talks to merge with State Street’s asset management business potentially creating a new ETF behemoth.
Talks are at an early stage and the discussions might not lead to an agreement, sources close to the discussions told the Wall Street Journal.
Last December, Bloomberg reported the two US giants were lining up a potential merger. State Street Global Advisors (SSGA) manages nearly $4trn in assets under management (AUM).
According to a Bloomberg Intelligence report, the combination of the two ETF arms would reduce their respective dependence on fan-favourite ETFs such as the SPDR S&P 500 ETF Trust (SPY), the world’s largest ETF, and Invesco’s QQQ strategies, making the combined firm less vulnerable to changes in individual product performance and flows.
A product transition would also occur smoothly, given the lack of overlap between the two product line-ups based on assets linked to specific index providers.
Crucially, though, the coupling would intensify competition to fill the top three positions for European ETF issuer AUM.
According to data from Morningstar, Invesco and SSGA pulled in €8.5bn new ETF assets in H1, taking the combined AUM to €98bn. And while this is well short of BlackRock’s €36.6bn AUM, it is not in a completely different league to DWS’s €10.2bn haul, nor Amundi-Lyxor’s combined €10.4bn.
The talks follow State Street’s acquisition of investment bank Brown Brothers and Harriman’s investor service business for $3.5bn.
