Key facts
- T. Rowe Price has agreed to acquire F/m Investments.
- The acquisition is expected to more than double T. Rowe Price's assets in fixed-income ETFs.
- F/m Investments manages $19 billion in assets, including over $10 billion in 20 ETFs.
- T. Rowe Price manages $1.87 trillion in assets overall, with $6.5 billion in its own ETF products.
- The deal is seen as indicative of a wave of consolidation in the U.S. ETF industry.
- F/m Investments was the first asset manager to offer both mutual fund and ETF share classes for the same portfolio.
T. Rowe Price has entered into an agreement to acquire F/m Investments, a move that is expected to significantly expand its presence in the fixed-income exchange-traded fund market. The acquisition, announced on Thursday, would more than double T. Rowe Price's assets invested in this specific sector.
This transaction follows a trend of consolidation within the U.S. ETF industry, which is valued at $15.7 trillion. Earlier this month, Goldman Sachs announced its intention to acquire Neos Investments for up to $2.25 billion, building on its earlier acquisition of Innovator Capital. Analysts view these deals as indicators that a wave of consolidation is gaining momentum in the ETF space.
Alex Morris, founder of F/m Investments, stated that the firm received multiple expressions of interest before initiating a formal process. While the terms of the transaction were not disclosed, F/m Investments currently manages $19 billion in assets, with over $10 billion allocated to its suite of 20 ETFs. In contrast, T. Rowe Price, which manages a total of $1.87 trillion, has only about $6.5 billion of its $220 billion in fixed-income investments within its own ETF products. Bryan Armour, an analyst at Morningstar, noted that T. Rowe Price ranks 26th among U.S. ETF providers, with a significant portion of its ETF assets in equity funds.
Data from State Street Investment Management as of July 31 indicates that growth rates in fixed-income ETFs are currently outpacing those in equity ETFs in the U.S., when measured as a percentage of assets under management. Todd Sohn, an ETF strategist at Strategas, commented that the competitive landscape in ETFs is intensifying, requiring smaller players to find ways to boost distribution. He suggested that acquisitions are increasingly becoming a strategy for established asset managers with a smaller ETF footprint to tap into this growth.
F/m Investments has been noted for its innovative product development, being the first asset manager to leverage the SEC's allowance for both mutual fund and ETF share classes of the same portfolio. The firm also recently filed for permission to tokenize shares of its three-month Treasury bill ETF. Arif Hussain, head of global fixed income at T. Rowe Price, highlighted that F/m Investments' unique ETF product development capabilities will complement T. Rowe Price's existing active fixed income offerings.