ETF Securities is selling Canvas, its ETF white labeling platform, to Legal and General Investment Management, the UK's largest asset manager.
The deal, which has been signed for an undisclosed sum, will catapult LGIM into the ETF industry and allow it to immediately start listing an armada of ETFs on a ready-made UCITS platform.
The acquisition comes two days after ETF Securities sold its main ETF platform to WisdomTree, the US fund manager, for $611 million.
The deal comes at an important time for Europe's ETF business.
This year, US ETF issuers have raced open-throttle into the European ETF market, which many US issuers regard as the next major frontier. With the US market mired in a total fee war and with the widely anticipated Mifid EU regulations, thought by many to be rocket fuel for ETFs, soon to be signed, US issuers are increasingly looking to London, Paris and Frankfurt for opportunity.
Thus major US money managers - like Fidelity, Franklin Templeton and Invesco - have been rapidly rolling out products through European capitals, especially London.
In this market, the Canvas acquisition will allow LGIM to skip the slow process of building its own platform - which can take years - and cut straight to harvest. It will give LGIM, Europe's second largest fund manager after BlackRock, a running start in competing with big US money managers on its home turf in London.
"The fact that they're going to enter the ETF market will just change things completely," a source close to the deal told ETF Stream.
"They realize the urgency in the way that the whole fund managing industry is changing."
The deal also means that LGIM enters the ETF market with some scale. Canvas has $2.5bn in assets and 17 ETFs, across equities fixed income and commodities. While relatively small by industry standards, these holdings give LGIM a launch pad that other issuers lack. Acquiring Canvas also gives LGIM staff with decades of experience in the ETF industry.
Mark Zinkula, LGIM CEO, said: "The ETF market is one of the fastest growing segments in asset management. 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. We are well positioned to leverage the scale of our $587bn index business to develop an ETF product range that complements our existing range of index funds."
"The acquisition of Canvas enables us to cater to a growing base of clients across Europe and further grow our market share in both retail and institutional markets. LGIM shares a strong cultural alignment with Canvas and we look forward to working with the team going forward."
LGIM began as an insurance company for lawyers in the 1830s, but has since grown into the largest British asset manager with over $1.2tr in assets under management.
Becoming investment managers is common for insurance companies. Insurers receive premiums up front, which they then invest in order to hedge risk and grow a pool of capital against which premiums can be paid. In recent years, insurers in the US - including USAA and NY Life - have also become ETF issuers. That LGIM is doing the same suggests UK insurers are taking a lead from their US counterparts.
