WisdomTree Investments has emerged as a potential acquisition target for businesses looking to enter the ETF industry.
According to analysts at Credit Suisse, acquiring the world’s sixth-biggest ETF provider would enable a bank to enter the ETF game, offering them a way to catch up with the other big players.
The New York based provider would be far easier to purchase than the other big ETF providers such as iShares, Vanguard and SPDR.
An acquisition of WisdomTree “may provide the last opportunity for an outsider to enter the ETF business which has very high barriers to succeed (but low barriers to entry)”, the Credit Suisse analysts said.
“We believe WisdomTree would make an attractive takeout target for a global bank (with wealth manager and asset manager).”
A takeover attempt on the ETF house has happened already in recent months. WisdomTree reportedly explored a sale to JP Morgan Chase last December however, the two parties could not agree on a price.
Peter Sleep, senior investment manager at 7IM, said there were a number of potential companies that could acquire the asset manager but only for a price that reflects the challenges it faces.
“The most obvious, deep pocketed acquirer is JP Morgan and they apparently walked away because the price asked was too high.”
Outflows is a key area of concern as the asset manager’s two main equity products, DXJ and HEDJ have suffered $25bn redemptions in the last three and a half years.
“WisdomTree say itself in its 10-K that its market is ‘highly competitive and we face substantial competition in virtually all aspects of our business’. That is not overstating it,” Sleep added.
In 2017, the firm acquired ETF Securities for $611m at nearly $12 a share. Sleep said he would be "very surprised" if WisdomTree did not accept an offer for less than that amount. Shares are currently trading around $7.24.
For sale – Xtrackers on the auction block?
Potential acquisitions continue to dominate the space. The latest to hit the headlines is DWS’s Xtrackers business after it was reported by Bloombergthe Swiss Bank UBS is considering a takeover of DWS.
Last July, Societe Generale acquired Commerzbank’s ETF range while Invesco has made a number of purchases over the past few years including Source, Guggenheim Investments’ ETF range and OppenheimerFunds.