BlackRock Investments Canada Inc., which acquired exchange-traded fund provider Claymore Investments Inc. three weeks ago, has killed the Claymore brand.
Nearly all the Claymore ETFs were rebranded Thursday to the iShares name. Ticker symbols for these funds listed on the Toronto Stock Exchange remain unchanged.
Canadian ETF giant BlackRock snapped up the No. 2 ETF provider just after U.S. fund powerhouse Vanguard Group Inc. began its assault on Canada in January with its first suite of low-fee ETFs. BlackRock now has more than 80 per cent of the market share in this country.
The quick disappearance of the Claymore brand has raised some eyebrows. “It did happen pretty quickly,” Morningstar ETF strategist John Gabriel acknowledged in an interview.
“iShares, at least, globally is definitely the stronger brand, and BlackRock as a firm spends a lot of money on marketing…Trying to be some two-headed beast would be more challenging and definitely more expensive.”
But “the big turnoff for new investors looking at the industry now is that they are going to see basically one giant player,” Mr. Gabriel said.
One ETF whose name has not changed is Claymore Inverse 10-year Government Bond ETF, so it will likely disappear sometime because BlackRock is unlikely to want to wade into the leveraged or inverse ETF space, he added.
Toronto-based Claymore was once a unit of U.S.-based ETF provider Claymore Group Inc., which was acquired by New York-based Guggenheim Partners LLC in 2009. The Canadian arm was built up by entrepreneur Som Seif, who left the company recently.
Industry observers suggest it will be interesting to watch how BlackRock manages its two brands under one roof when it and Claymore used to bash each other about flaws in each other’s offerings.
The iShares ETFs focus on market-capitalization weighted indexes, while the Claymore brand was identified with indexes that weighted companies according to “fundamental” factors like cash flow and dividends.
“When you rebrand all the Claymore products to become iShares products, that ability to be able to differentiate is lost, or at least severely constrained,” said John DeGoey, a vice-president and associate portfolio manager at Burgeonvest Bick Securities.
“I think it is going to be harder to explain fundamental indexing if you don’t have the Claymore brand,” said Mr. DeGoey, who became a big supporter of the Claymore products partly because he felt “the Canadian market place needed more competition in the ETF space.”
The disappearance of the Claymore brand, however, could help Invesco Canada Ltd. make inroads in Canada with its sister company’s PowerShares ETFs.
U.S-based Invesco PowerShares Capital Management LLC of Atlanta is also known for ETFs focused on fundamental indexing, and was even seen as a possible buyer for Claymore. Invesco PowerShares entered the Canadian market last June, and seemed to be copying some of the Claymore ETF offerings.
“It could certainly be an opportunity for PowerShares to carve out its niche [in Canada]and take over that position, and be the alternative or fundamental ‘intelligent’ indexer,” Mr. Gabriel said. “We’ll see how aggressively they go after that now.”
Dan Hallett, a fund analyst at HighView Financial Group, expects existing investors to be complacent about the Claymore brand’s disappearance.
If investors liked the Claymore ETF offerings, they are still there, he said. “It’s still the same price and strategy with even the same symbols. It’s just the sponsor name that has changed.”