Global asset managers The TCW Group has announced the acquisition of the ETF business and its infrastructure from Engine No. 1, a San Francisco-based investment firm. The transaction is expected to close in the third quarter of 2023, subject to shareholder approval.
“This acquisition signifies an early chapter in TCW’s next stage of growth, adding important capabilities and infrastructure to provide clients with the ability to access TCW’s best investment ideas and strategies through innovative financial vehicles,” says Katie Koch, President and CEO of TCW. “We look forward to integrating the teams into TCW and continuing to invest in the growth of an ETF platform.”
The acquisition marks the latest in TCW’s ongoing expansion of investment solutions. Earlier this year, TCW announced a strategic partnership with Lakemore Partners Ltd. to support the growth of TCW’s collateralised loan obligation platform.
Through the transaction, TCW is acquiring the entirety of Engine No. 1’s Transform ETF platform, which includes the active, thematic Transform Climate ETF (Ticker: NETZ); Transform Supply Chain ETF (Ticker: SUPP); and the Transform 500 ETF (Ticker: VOTE) index fund. Combined, the Transform ETF platform manages more than USD600 million in US equity ETFs focused on supply chain onshoring, and energy transition. Upon closing, Engine No.1’s ETF portfolio managers and staff will be integrated into TCW.
“Engine No. 1 is built around the idea that there is incredible investment opportunity in solving large-scale problems, and our thematic ETFs are constructed around that value creation principle,” says Chris James, Founder and Chief Investment Officer of Engine No. 1. “We’re thrilled that TCW recognises that opportunity and is uniquely positioned to leverage its well-established platform and distribution network to quickly scale the business to seek even greater success.”
The firm writes that the Transform ETF platform expands TCW’s capabilities by providing the infrastructure for TCW to build out a larger ETF platform. Engine No. 1’s capabilities also complement TCW’s existing thematic strategies in artificial intelligence, space technology, next-generation mobility, and renewable energy infrastructure. This acquisition also expands the range of investment products available to TCW’s clients with an emphasis on sustainable investing grounded in economic realities.
“We’ve built a tremendous ETF business at Engine No. 1 and we’re extremely excited by the opportunity to scale it even more quickly as part of TCW,” says Jennifer Grancio, Chief Executive Officer and architect of Engine No. 1’s ETF business, and who as a founding member of BlackRock’s iShares ETF business led European, US and global distribution. “The active, thematic focus of the Transform ETFs fits incredibly well into TCW’s growth strategy and we’re thrilled to help drive the firm’s expansion into new investment solutions.”
Commenting on the acquisition, Todd Rosenbluth, VettaFi’s Head of Research says: “TCW is one of the most prominent asset managers that does not offer their own ETFs, but only mutual funds. The pendulum is not swinging back away from ETFs. It makes sense for TCW to be more than a subadviser. They have a strong brand with advisers that can be leveraged to make inroads, despite arriving late to the ETF party.”