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Invesco has bought Source, the loss-making London-based exchange traded fund provider, in a deal that will bring another US asset manager into the rapidly expanding ETF market in Europe.
Atlanta-based Invesco already ranks as the world’s fourth largest ETF manager with assets of $125bn but it has historically lacked a meaningful presence in the European ETF market.
“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,” said Martin Flanagan, president and CEO of Invesco.
Source ranks as the seventh largest ETF manager in Europe with assets of $25bn but the business has struggled to achieve profitability in the face of ferocious fee competition from larger rivals including BlackRock, Vanguard, Deutsche Asset Management and Lyxor.
“Invesco and Source are extremely complementary, and the combined business will be a true leader in the ETF market across Europe,” said Mike Paul, Executive Chairman of Source.
Warburg Pincus, the private equity group, acquired Source in 2014 and surprised industry watchers by putting the business up for sale less than three years later.
The deal is expected to close in the third quarter of 2017, pending regulatory approvals. Source was advised by JP Morgan, and Freshfields as counsel. Terms of the deal were not announced but previous media reports have indicated that JPMorgan was instructed by Warburg Pincus to seek a price of between $400m and $500m for Source.
Since the takeover of Source by Warburg Pincus, a number of key staff members have left the ETF unit, including its three co-founders. Ted Hood , the chief executive, Michael John Lytle, the chief development officer, and Peter Thompson, the president and acting chief executive, have all departed.
Julian Ide, a former chief executive at Old Mutual Global Investors, was brought in to lead Source in March 2016, but he has had little time to make an impact on the business before Warburg Pincus decided to proceed with a sale.