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Invesco acquires ETF firm Source

Invesco acquires ETF firm Source

(Update) fund giant Invesco has sealed a deal to buy exchange traded funds (ETF) firm Source. 

The parent of UK-based Invesco Perpetual and another undisclosed firm were reported to have been vying to buy Source, which is owned by Warburg Pincus and a conglomerate of investment banks, including JP Morgan and Goldman Sachs.

The transaction - expected to complete in the third quarter for a rumoured $500 million (£390 million) - includes approximately $18 billion worth of Source assets, plus around $7 billion in externally managed AUM (as of March 31, 2017). 

Source will sit alongside Invesco's existing ETF business, PowerShares.

'We’re excited about this opportunity to build on Invesco’s 40 years of factor investing experience and our existing PowerShares ETF business, which will significantly enhance our ability to deliver meaningful solutions to institutional and retail clients in Europe and around the world,'  Invesco president and CEO Martin Flanagan said in a statement. 

'The addition of Source will help us meet increasing demands from clients who want to work with investment organizations that can deliver across the full range of investment capabilities and provide the outcomes they seek.'  

Source chair Mike Paul added: 'We are very proud to have built Source into one of Europe’s most competitive, and innovative ETF providers and look forward to the many opportunities now afforded by this transformative stage in our development.' 

A combination of growing regulatory pressures and some disillusionment with active fund management have increased demand for lower cost passive strategies in recent years. 

According to data from ETFGI, ETFs and exchanged traded products registered net inflows of $66 billion in the first quarter, lifting assets under management to $3.9 trillion at the end of March.

A recent trading update from the world's biggest asset manager, BlackRock, showed its ETF business iShares accounted for $64 billion of the $80bn net inflows the firm registered in the first quarter.

A number of traditional active fund firms have looked to get exposure to this burgeoning market. 

Last month JP Morgan Asset Management hired Invesco PowerShares boss Bryon Lake to lead an ETF expansion across Europe and Asia.

Fidelity International - which recruited a team to build an ETF business in February 2016 - made its first foray into this market earlier this month with the launch of two income-focused smart beta products. 

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