In this issue of China Briefing:
In and there was a wave of ETF company acquisitions by large asset management firms. The reason was simple: ETFs were not a fad that was going away. Asset management firms had two options: Oppenheimer Funds bought RevenueShares full disclosure: Hartford Funds acquired Lattice Strategies.
Columbia Threadneedle bought Emerging Global Advisors.
For most of the history of ETFs, ETF firms were taking assets from competing industries hedge funds, mutual funds, and futures. It was much better going after the larger pie of assets in or flowing to the mutual fund and hedge fund industries. The ETF industry has now grown to the point that ETF firms are no longer only competing against those other industries for assets.
ETF firms are now competing against each other as well. Franklin Templeton launched a suite of low-cost ETFs to use their distribution platform to enter the low-cost battle. Not many assets thus far! This can give us insight into what stage of development the industry is at and where we are heading.
The eye test The Moneyball approach To the old school baseball types, the eye test is the way to go.
Looking at the industry inI saw that almost all ETFs were market cap weighted. However, a few firms were doing something slightly different. These innovators were taking the larger indexes, e. Wes talked about the academic research on factor investing.
Previous to my discussion with Wes, I was not aware of the academic research behind the so-called smart-beta strategies that were being pitched. As a practitioner, I knew the ETF structure was superior on many angles cost, transparency, and taxes.
But to invest in a concentrated amount of stocks based on factor research which Wes discussed seemed like a large leap. To me, there was something intuitive about this approach. If we believe in a certain investing factor, we should own the factor and not dilute the factor via the closet-indexing constructs that existed in smart-beta strategies.
Yeah, sign me up! And for similar eyeball test type qualities, it led me to name three firms, which I believed would make good acquisitions at the time because they would continue to grow quickly: Pacer and Cambria are quite a bit pricier of an acquisition now 1 2.
But gathering quantitative insights on the sports industry has uncovered new ways of looking at individual players and teams. My goal is to share with you some of the qualitative characteristics of firms that I believe shapes a lot of what they doand now attempt to quantify some of that as well.
This year, with the industry beginning to compete against each other, my goal is to categorize similar ETF firms together to give us a better feel for what motivates the different firms.
The normalized HHI score typically used to measure industry concentration will give us color on what firms are robust and what firms are fragile.Beyond the Balance Sheet: Understanding Environmental Liabilities in Mergers & Acquisitions November 20, Make sure your valuation process considers all of the costs – including the cost of environmental compliance, deferred maintenance and legacy environmental issues.
Understanding the State of the ETF Industry through Mergers, Acquisitions, and Fragility Home / Posts / Research Insights / ETF Investing / Understanding the State of the ETF Industry through Mergers, Acquisitions, and Fragility. Understanding Mergers & Acquisitions: Due Diligence Through a Different Prism.
Financial Services & E-Commerce Newsletter - Volume 2, Issue 3, Winter In the language of mergers and acquisitions, battleground terms meld with bizarre metaphors to create a unique vocabulary. Unlike all mergers, all acquisitions involve one firm purchasing another - there is no exchange of stock or consolidation as a new company.
Acquisitions are often congenial, and all parties feel satisfied with the deal. Other times, acquisitions are more hostile.
In the language of mergers and acquisitions, battleground terms meld with bizarre metaphors to create a unique vocabulary.