Global asset management firm OppenheimerFunds is to acquire VTL Associates (VTL), an independent institutional investment firm best known for its RevenueShares exchange traded funds (ETFs).
The acquisition expands OppenheimerFunds' active client offering into the growing smart-beta space, subject to customary closing conditions and consents.
VTL manages USD1.7 billion for investors across eight ETFs and its separate accounts. Of the six ETFs that have sufficient track records to be rated by Morningstar, four are either four- or five-star rated.
"Investors are looking to active managers for innovative solutions to add to their overall investment strategy, including products that are designed to deliver better-than-market returns with full transparency of their investment process," says Art Steinmetz (pictured), Chairman, President and CEO of OppenheimerFunds. "For nearly 60 years we have been in the forefront of developing strategies for serving our clients, from offering one of the first global equity funds to being an early adopter of strategic income strategies as well as master limited partnerships in the energy space. VTL's distinctive approach to smart beta is an outstanding addition to our compelling array of investment strategies across all asset classes."
The acquisition will bring both high-quality smart-beta ETFs and an ETF platform offering cost- and tax-efficient investment solutions that financial advisors are increasingly using in their investors' portfolios.
In general, smart beta strives to identify factors that have the potential to generate positive risk-adjusted returns compared with market-cap-weighted index funds. VTL applies a proprietary methodology to screen and weight the stocks in each ETF according to various factors such as revenue or dividends, instead of by market capitalisation. This practice is designed to lower exposure to overvalued companies, while maintaining diversification by investing in all of the stocks in the given index. VTL has been successfully employing this strategy in ETFs since 2008.
"Our firm has grown by serving the needs of investors seeking above-market returns delivered through a suite of custom index products and institutional advisory services," says Vince Lowry, Founder of VTL. "We're delighted to join the OppenheimerFunds family and make our strategies available through OppenheimerFunds' retail, high net worth and institutional channels."
Peter Mintzberg, Head of Corporate Strategy and Development at OppenheimerFunds, says: "Clients have expressed interest in OppenheimerFunds expanding its array of investment capabilities. We are expediting that process with a strategic acquisition, as we did most recently in 2012 with SteelPath, which enabled clients and their investors to participate in the income and tax advantages afforded by master limited partnerships. We continue to look for these types of opportunities to further broaden our offering in a way that is consistent with our core investment approach."
Citigroup Global Markets acted as financial advisor and Willkie Farr & Gallagher as legal counsel to OppenheimerFunds on the transaction. RBC Capital Markets served as financial advisor and Metz Lewis Brodman Must O'Keefe as legal counsel to VTL.
