Exchange-traded funds player Evolve Funds Group Inc. is more than quadrupling its assets under management as it scoops up competitor Sphere Investment Management Inc.'s ETF business.
Evolve, which currently has approximately $20-million in assets under management, announced it has entered into an agreement with Sphere to purchase the management contracts for all five of Sphere's listed exchange-traded funds.
The purchase price Evolve is paying to acquire Sphere's ETF assets is undisclosed, but upon completion of the acquisition, Evolve will be left with an additional $68-million in assets under management.
"These ETFs will continue to act as a core holding for client portfolios, as they provide good, risk-adjusted returns and enhanced yield for investors," said Keith McLean, chief investment officer for Sphere.
Evolve joined the Canadian ETF industry earlier this summer and since its inception has launched several niche products new to the Canadian market, including ETFs that invest in cybersecurity, the next generation of automobiles and companies that promote gender diversity. In addition, it was the first Canadian ETF provider to file a preliminary prospectus for a bitcoin ETF (which is still pending regulatory approval).
Raj Lala, president and CEO of Evolve, says the acquisition of the Sphere ETFs will fill several product gaps he currently sees within the Evolve lineup, such as exposure to emerging markets and the European market. The deal will also open doors for cross-selling opportunities and additional distribution possibilities for Evolve funds.
"A lot of our other products are allowing us to get our foot in the door with financial advisers, and obviously a lot of those advisers have exposure to Europe and emerging markets," Mr. Lala said. "This acquisition now gives us an opportunity to sell additional products to the advisers who have those needs within their investment portfolios."
Founded by Lewis Bateman, who previously held positions at ETF providers First Asset and Horizons ETFs Management (Canada) Inc., Sphere Investments entered the Canadian market over a year and a half ago with an initial suite of four ETFs that track the FTSE sustainable yield indexes.
At the time of the launch, Sphere announced it was the first in a series of more than 30 ETFs the firm had planned to bring to market as part of its integrated wealth-management platform. But, despite certain funds showing positive results in performance, Sphere struggled to reach critical mass in expanding its overall asset base, and shortly after hitting its first anniversary in the market, decided to exit the ETF industry altogether.
While the acquisition is subject to regulatory and unitholder approvals, it is expected the funds will continue to utilize a strategy that follows the sustainable yield indexes.
This is the second ETF player to exit the industry this year. In July, WisdomTree Investments Inc. announced it had agreed to pay $2.4-million to acquire and manage Questrade Financial Group's ETF business. The deal has yet to close, but upon regulatory approval will add approximately $89-million to WisdomTree's current $256-million in assets under management.
The Sphere Family of Funds to be aquired by Evolve includes: