US Private Equity Firm Takes Majority Ownership Of ETF Provider Source

Tom Burroughes

21 January 2014

An affiliate of US-headquartered Warburg Pincus, the global private equity firm, has agreed to buy a majority stake in , the asset manager and provider of exchange traded products with over $15 billion of assets.

The financial size of the transaction wasn’t disclosed by the parties when contacted by this publication. One report by the Financial Times put the figure at equivalent of around 2 per cent of Source’s AuM – or around $300 million.

The transaction highlights how the exchange traded products industry, which has expanded rapidly in recent years due to the popularity of such products as a cheap way to play markets, is now seeing consolidation. Credit Suisse sold its ETF business to BlackRock last year for example.

Existing shareholders in Source, a business founded in 2009, include Bank of America Merrill Lynch, Goldman Sachs, JP Morgan, Morgan Stanley and Nomura. They will continue as minority shareholders.

Lee Kranefuss, currently an executive-in-residence at Warburg Pincus, will join Source as executive chairman; he will work with the current management team led by CEO Ted Hood. Kranefuss has a strong track record in the world of exchange-traded products – he was the architect and CEO of iShares, formerly part of Barclays Global Investors, now the largest global ETF platform.

Source offers equity, fixed income, commodity and alternative market exposure through ETFs and exchange traded commodities; the firm operates an open-architecture approach, partnering with organisations such as PIMCO and Man GLG.

“This transaction will provide Source with substantial additional resources enabling it to further develop and launch new products, enhance existing products, expand client relationships and deliver investor solutions,” a statement from Source said.