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Virtus Investment Partners to acquire majority interest in ETF Issuer Solutions

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Virtus Investment Partners is to acquire a majority interest in ETF Issuer Solutions (ETFis), operator of a platform for listing, operating, and distributing exchange-traded funds. 

The transaction will provide Virtus with manufacturing capabilities for both active and passive ETFs, adding to its broad product line-up.

ETFis, founded in 2012, recently introduced the industry’s first actively managed ETF investing exclusively in master limited partnerships, the InfraCap MLP ETF AMZA, +0.14%. It currently manages two other ETFs and has seven additional ETFs in registration with the Securities and Exchange Commission. All of the company’s ETFs are managed by external subadvisers.

“There is growing interest among financial advisors and investors to use exchange-traded funds in their retail and institutional portfolios because of the tax efficiency and liquidity benefits that ETFs offer,” says George R Aylward, president and chief executive officer of Virtus. “The ETFis business model is similar to the Virtus approach of offering investors access to strategies of boutique managers. This partnership with ETFis will expand our product capabilities and allow us to offer compelling investment strategies in an actively managed ETF format.”

ETFis will become a Virtus affiliate and continue to operate as a multi-manager ETF platform, providing investors access to differentiated investment capabilities from select subadvisers. The company is led by its co-founders, Matthew B. Brown, who manages operations and technology capabilities, and William J Smalley, head of product strategy and management.

“We developed ETF Issuer Solutions to provide a technology-driven, ETF-specific platform that offers significant cost and operational efficiencies. The partnership with Virtus gives us the resources and support to execute on our long-term vision of building a leading multi-manager ETF platform,” says Smalley. “We are excited to have the opportunity to combine our offerings with Virtus’ extensive distribution capabilities to create a compelling alternative for asset managers that want to make their actively managed strategies available in an exchange-traded fund structure.”

The Newfleet Multi-Sector Unconstrained Bond ETF2 will be the first new offering managed by a Virtus affiliate added to the ETFis platform. The fund will leverage the Newfleet Asset Management team’s broad experience in multi-sector fixed-income investing in a strategy that will have the flexibility to capitalise on opportunities across all sectors of the bond markets, including evolving, specialised, and out-of-favour sectors, as it seeks to deliver relatively high income and an attractive total return. A registration statement for the fund has been filed with the SEC.

The transaction is expected to close in March. Terms were not disclosed. Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisor to Virtus. Haynes & Boone LLP acted as legal advisor to ETFis.

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