Korean investment giant Mirae Asset has sold its majority stake in BetaShares, the fast-growing Australian ETF provider, to American private equity firm TA Associates.

As part of the sale, Mirae offloaded its 51% interest, while minority shareholders also offloaded part of theirs, the AFR reports.

Mirae was a legacy shareholder of BetaShares, having acquired its stake incidentally when it purchased Horizons ETF, the Canadian ETF issuer, which helped build BetaShares as an Australian fund manager.

Outside Mirae, the biggest minority shareholder is Apex Capital, the venture capital firm owned by Alex Vynokur (pictured), Ilan Israelstam, Jason Gellert and David Nathanson. Apex Capital rents out its staff to BetaShares – a structure that allows Apex Capital to pool its bargaining power.

Over the past several years, BetaShares has successfully pursued a strategy of aggressive expansion – viewing the Australian ETF industry as a winner-takes-most market. The strategy has centred on reinvesting a significant fraction of revenue, which puts it in contrast to many of its competitors who focus on short-term profitability.

To this end, BetaShares has launched far more ETFs than any other provider, giving it a suite that covers the vast majority of asset classes and market segments.

It has hired more staff, giving it the biggest ETF sales team outside of Vanguard in Melbourne. It has also spent more on advertising than any other issuer in an effort to build brand awareness with retail investors.

The strategy has worked, and BetaShares has been rewarded with steep growth in assets under management over the past 24 months. BetaShares now commands a run rate revenue of almost $80 million, a figure second only to Vanguard.

The sale price was undisclosed, however, ETF issuers have typically been acquired on a 5-6x run rate revenue basis in the past. This would value BetaShares at $400-$500 million. However, the ETF industry is a mature market globally, meaning that an earnings-based valuation is perhaps more appropriate. As BetaShares is privately held, its books are not available for public viewing -- making its earnings difficult to gauge. 

Analysts contacted for comment said an earnings multiple of up to 19x would be appropriate for a privately-held asset manager like BetaShares. However, TA Associates may have been willing to pay a higher multiple if they planned to float BetaShares on the ASX in the near-term. They added that Australian asset managers typically trade on higher multiples than their international peers, due to the higher barriers to entry.

Meanwhile, mystery surrounds Mirae's motivations for selling. BetaShares was one of the most successful investments in Mirae's portfolio--making it unlikely that Mirae would have parted with BetaShares if it did not get an attractive price. 

Yet Mirae's acquisitions in the past have caused some to raise an eyebrow. The firm paid US$488 million (A$640M) for Global X in 2018, which had only US$10 billion assets under management (AUM) at the time. The figure was widely regarded as too high