Denver-based Janus Capital Group has agreed to pay $30 million to acquire the parent company of VelocityShares, a provider of institutionally focused exchange traded funds.
The deal to buy VS Holdings is the first foray into ETFs for Janus and should serve as a “platform” for new Janus hire Bill Gross to “roll out fixed-income ETFs,” Morningstar analyst Gregg Warren said.
About $1.8 trillion sits in the U.S. ETF market, but only 32.5 percent of that is owned by institutional investors, such as sponsors of defined benefit and contribution plans, according recent research from Cerulli.
The majority of EFT providers expect institutional adoption to grow in the next year, according to Cerulli.
VelocityShares was introduced in 2009. By September 2014, the Darien, Connecticut-based firm had raised about $2 billion across 21 products.
“This acquisition … (enables) us to work with the growing segment of financial advisors and institutions focused on these instruments,” Richard Weil, CEO of Janus, said in a statement.
VelocityShares co-managers Nick Cherney, Richard Hoge and Steve Quinn will remain as a part of Janus’ team, according to the statement.
The team started by developing ETNs — exchange traded notes — which leverage volatility indexes and commodities exchanges and are designed to provide traders and institutions with short-term hedging strategies.
VelocityShares later developed ETFs for long-term investment portfolios.
VelocityShares will continue to distribute its products through its existing distribution channels, as well as now being available to do so through Janus’ global marketing network.
“Janus’ global distribution network and commitment to product development creates very unique opportunities to deliver institutional quality ETFs to a wide range of investors,” Nick Cherney, CIO of VelocityShares, said in the statement.
Cerulli’s recent report on global ETF markets suggested Europe and other global regions are on the cusp of significant growth.
Cerulli said the low-cost investment options are benefiting from a favorable regulatory environment overseas, and that their growing popularity is easy to understand.
“ETFs are a tax-efficient way of offering low-cost diversification, trading and arbitrage options,” said Cerulli.
Gross left PIMCO to join Janus in late September, and will manage the new Janus Unconstrained Fund, which Sumit Desai, an analyst and research manager at Morningstar said on a recent conference call “is very different” from the huge Total Return Fund that Gross oversaw at PIMCO.
Gross “will have a more wide-ranging” investment mandate in the Janus fund than he did in managing Total Return, Desai said, and “no limit on the high-yield bond exposure that the fund can hold.”
ThinkAdvisor.com contributed to this report.