The folks at a 52-year-old Southern California mutual fund firm are preparing for their shop to buy
a Northern California, ESG-focused, activist hedge fund firm's ETF business. The deal would be the acquirer's first direct foray into the ETF space.
| Kathryn "Katie" Koch|
The TCW Group, Inc.
Yesterday, Katie Koch
, who took over
in February as president and CEO of the TCW Group
], and Chris James
, founder and chief investment officer of Engine No. 1
that Los Angeles-based TCW has agreed to acquire
San Francisco-based Engine No. 1's three-fund, $600-million-plus-AUM ETF business and infrastructure (but not Engine No. 1's private equity and hedge fund business). As part of the deal, Jennifer Grancio
, CEO and architect of Engine No. 1's ETF business, is expected to join TCW as global head of ETFs, confirms Doug Morris, a TCW spokesperson.
| Jennifer Lisa Grancio|
Fund Management at Engine No. 1
The deal, unveiled the day after TCW's first corporate strategy chief joined
the firm, is expected to close in the third quarter of 2023 (i.e. this quarter), pending shareholder approval. TCW's Morris declined to comment on the pricing and terms of the deal. He says that neither TCW nor Engine No. 1 worked on the deal with investment banks.
"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 invesmtent ideas and strategies through innovative financial vehicles," Koch states. "We look forward to integrating the teams into TCW and continuing to invest in the growth of an ETF platform."
The TCW team expects about 11 Engine No. 1 staff, including Grancino, to join TCW as part of the deal. TCW, by comparison, has about 690 employees worldwide and about $210 billion in AUM.
"Engine No. 1's team will either relocate to Los Angeles or work remotely," Morris tells MFWire
Engine No. 1's ETF include: the Transform 500 ETF
(VOTE), the Transform Climate ETF
(NETZ), and the Transform Supply Chain ETF
(SUPP). TCW, on the other hand, has previously only worked in the ETF space as a subadvisor to others' ETFs.
"This marks TCW's first move into ETFs that we manufacture and distribute," Morris writes. "This transcation will provide the infrastructure necesary for TCW to build out a proprietary ETF platform."
James lauds TCW as "uniquely positioned to leverage its well-established platform and distribution network to quickly scale the business to seek even greater success."
"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," Grancio states. "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."
Once the deal closes, watch for Grancio and her team to further expand TCW's ETF business.
"We expect to convert certain existing TCW funds into ETFs and expect to develop other ETF products over time," Morris writes. "TCW has a large liquid equities business, but we're missing the ETF wrapper and wanted to jump-start that. This helps us recommit to our public equities business, and add to our growing thematic area."
Engine No. 1 entered
the ETF space two years ago with the launch of Fund Management at Engine No. 1 LLC, the Engine No. 1 ETF Trust
, and VOTE. That first fund blended passive equity investment selection with activist ESG proxy voting and the like. Grancio has spearheaded Engine No. 1's ETF effort since joining the firm in 2020.
Grancio, a founding team member at iShares, spent 19 years with BGI and BlackRock, and she also worked with PwC. She is an alumna of Columbia Business School and of Stanford University.
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