Industry Updates

LGIM agrees deal with HANetf to merge US energy infrastructure ETFs

LGIM will retain a ‘commercial interest’ in the ETF following the merger

Theo Andrew

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Legal & General Investment Management (LGIM) will merge its US infrastructure ETF with a similar HANetf product after the pair entered into a commercial agreement.

Effective 12 October, the $37m L&G US Energy Infrastructure MLP UCITS ETF (MLPX) will merge with the $19.5m Alerian Midstream Energy Dividend UCITS ETF (MMLP), according to a recent shareholder notice.

Following the merger, which is subject to necessary approvals, HANetf will be solely responsible for managing the $56.5m ETF, of which LGIM will still retain a “commercial interest”.

HANetf will also be responsible for the legal, advisory or administrative costs of the merger.

Investors of MLPX will also see their fees rise following the merger, with MMLP, which tracks the Alerian Midstream Energy Dividend index, holding a with a total expense ratio (TER) of 0.40% versus 0.25% for MLPX, which tracks the Solactive US Energy Infrastructure MLP index.

The LGIM product has outperformed MMLP so far this year, returning 13.6% versus 7.5%, as at the end of August.

An LGIM spokesperson said: “Following a detailed review of our investment proposition that considered changing investor preferences and market environment, we believe that the proposed merger is in the best interests of existing shareholders who wish to maintain continuous exposure to the US energy infrastructure market.”

Hector McNeil, founder and co-CEO of HANetf, told ETF Stream the merger of two “sub-scale ETFs” made sense for both parties with HANetf acting as a service provider.

“We both had MLP products which were arguably sub-scale but the merged ETF should be over the $50m mark which makes it much more viable for both parties,” McNeil explained.

“Revenues will be a split of the assets under management but we are doing the heavy lifting and looking after the ETF.”

McNeil added the deal could be a precursor to similar and bigger mergers for HANetf in the future, in which the white-label ETF issuer could potentially merge providers’ entire platforms with its own.

“Something like this gives a lot of optionality to people,” he said. “There could be more opportunities with firms that have platforms that are subscale and are looking for ways to reduce the cost of their business.

“This could be additive to our current range or it could be mergers. There are a bunch of different scenarios.”

In June, HANetf expanded its range with the launch of the Future of Defence UCITS ETF (NATO).

LGIM currently houses 49 ETFs with $12.6bn AUM, as at the end of June.

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