BlackRock to Buy $17.6 Billion ETF Unit From Credit Suisse
The purchase of a business with $17.6 billion of client assets under management is expected to close by the end of the second quarter, the New York-based firm said today. BlackRock didn’t disclose the price of the Credit Suisse unit, which has 58 ETFs, including $8.7 billion in nine funds domiciled in Switzerland and others in Ireland and Luxembourg.
The acquisition of Europe’s fifth-biggest exchange-traded products business will consolidate the top ranking of BlackRock’s iShares unit, which has a 38 percent market share in the region, according to figures published last month by the New York-based firm. Chief Executive Officer Laurence D. Fink said last year BlackRock would address the strategy of its iShares unit, which has about $760 billion in ETPs, after losing market share in the U.S. to Vanguard Group Inc.
“The ETF business is generally a low margin business which needs scale to make it attractive,” Teresa Nielsen, an analyst at Vontobel Holding AG in Zurich, said in a note to clients. That means the transaction price as a percentage of managed assets may be “relatively low,” she said.
The acquisition comes three months after Philipp Hildebrand, who resigned as head of the Swiss central bank last January over a currency trade by his wife Kashya, joined BlackRock as vice chairman. Based in London, Hildebrand oversees the firm’s relationships with institutional clients outside the U.S. and reports directly to Fink.
BlackRock has a history of integrating smaller asset managers and the Credit Suisse business will bolster its presence in Europe, according to an Oct. 23 research note by Citigroup Inc.
“The transaction significantly extends BlackRock’s footprint in Switzerland, which is home to one of the deepest investor bases in Europe,” Joe Linhares, head of Europe and Middle East at BlackRock’s iShares unit, said in the statement.
Credit Suisse, Switzerland’s second-biggest bank, sold the unit as part of a 15.3 billion-franc ($16.5 billion) capital raising initiative announced in July after central bank prompting.
ETPs include those structured as funds, as well as exchange-traded notes. ETFs grant shareholders a claim on assets held by the fund, while ETNs represent an unsecured debt obligation by the issuer to the holder. ETPs, unlike mutual funds, trade throughout the day on an exchange, like stocks. They typically hold a basket of securities or physical commodities that tracks an index.
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