T. Rowe Price has agreed to acquire F/m Investments, a move that would more than double its assets invested in fixed-income exchange-traded funds, the two firms said on Thursday.
The transaction is the second acquisition of an ETF manager announced so far this month, following last week's deal by Goldman Sachs (GS.N) to acquire Neos Investments for as much as $2.25 billion. The latter purchase was the second of an ETF manager by Goldman, which closed its estimated $2 billion deal to acquire Innovator Capital in April.
These acquisitions signal to analysts that a wave of consolidation in the $15.7 trillion U.S. ETF industry is gaining momentum.
"This is a scale game, and success for us wasn't going from managing $20 billion to $30 billion or $40 billion, it was boosting activity 10x or beyond," said Alex Morris, who founded F/m Investments in 2019, and now oversees the management of $19 billion in assets, more than $10 billion of which are invested in the firm's suite of 20 ETFs.
The agreement was reached after F/m received multiple expressions of interest from potential partners or acquirers and decided to open a formal process, Morris told Reuters.
Terms of the transaction were not disclosed. T. Rowe Price manages $1.87 trillion in assets, but only about $6.5 billion of its $220 billion of fixed-income investments are invested in its own ETF products. The Baltimore-based asset manager ranks 26th among U.S. ETF providers, with 80% of those assets invested in equity funds, said Bryan Armour, an analyst at Morningstar.
Growth rates in fixed-income ETFs now exceed those in equity ETFs in the U.S., with growth measured as a percentage of assets under management, according to data from State Street Investment Management as of July 31.
"This is a reflection of how competitive the landscape is becoming in ETFs as the market grows and grows," said Todd Sohn, ETF strategist at Strategas. "All the successful smaller players out there are still going to need to find a way to boost product distribution channels; if you're an established asset manager with a smaller footprint in ETFs, acquisitions increasingly will be a way to tap into that growth."
F/m Investments was the first asset manager to take advantage of the SEC’s decision to open the door to allow both mutual fund and ETF share classes of the same portfolio, and earlier this year filed for permission to tokenize shares of its three-month Treasury bill ETF.
"F/m brings unique ETF product development capabilities that will complement T. Rowe Price’s active fixed income lineup," said Arif Hussain, head of global fixed income at T. Rowe Price.
