ETF Industry Heats Up Following PowerShares Acquisitions

This article was originally published on ETFTrends.com.

The ETF industry is growing more competitive as companies around the globe try to quickly expand to tap into trillions of dollars in potential investment assets.

"The winners and losers are being more clearly identified; we felt the ability to scale quicker led us to the opportunity to look at inorganic or M&A transactions, so buying Source in Europe, which was the largest independent player in that market... and closer to home here in the U.S., the announcement to purchase the Guggenheim ETF business, which we hope is going to close later this year," Dan Draper, Global Head of ETFs for PowerShares, said at the Inside ETFs 2018 conference.

The acquisition of these varying types of ETF business would help Invesco PowerShares shore up the gaps in these two ETF markets.

"So for us, to really get the large, institutional side products for Europe, that's where that scale happened. In the U.S., now Guggenheim, that is all about content. This incredible ETF business that Guggenheim has built through Rydex and Claymore businesses, the equal-weight S&P 500 - a simple but one of the most effective smart beta strategies," Draper said.

The Guggenheim S&P 500 Equal Weight ETF (NYSEArca: RSP), which tracks the S&P 500 Equal Weight Index, is the largest equal weight-oriented ETF and is arguably one of the first smart beta or alternative index-based ETF to hit the market. The underlying S&P 500 Equal Weight Index is the equal weight version of the S&P 500 Index. The equal-weight index contains the same component holdings as the cap-weighted S&P 500, but each company in the S&P 500 Equal Weight Index is allocated the same weight at each quarterly rebalance. Consequently, the holdings are balanced across all of the S&P 500 companies evenly over time.

Additionally, Guggenheim is also known for its line of defined-maturity bond funds, such as the more recently launched Guggenheim BulletShares 2027 Corporate Bond ETF (NYSEArca: BSCR) and the Guggenheim BulletShares 2025 High Yield Corporate Bond ETF (NYSEArca: BSJP), among others. These defined-maturity bond funds typically buy bonds that mature in the year the ETF will terminate, ensuring that investors can collect the bonds’ face value at maturity, along with a steady income stream along the way. As such, investors are meant to buy-and-hold these securities until maturity.

"So we're really excited in different ways - equities and fixed-income in particular," Draper added.

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