January 11, 2012 / 5:48 PM / in 6 years

BlackRock acquires Canadian ETF firm

BOSTON (Reuters) - BlackRock Inc, the world’s largest money manager, said on Wednesday it will expand its exchange-traded fund business in Canada by acquiring privately held Claymore Investments.

New York-based BlackRock BLK.N will buy Claymore from Guggenheim Partners, a privately owned financial services firm based in New York and Chicago, for an undisclosed sum. The all-cash deal is expected to close by the end of the first quarter and will be “neutral to modestly accretive” to BlackRock’s 2012 earnings, BlackRock said.

BlackRock, which manages more than $3.3 trillion overall, will add C$7 billion of funds from Claymore to the C$29 billion currently overseen by its iShares unit in Canada.

The Canadian ETF market, C$53 billion at the end of November, is a tiny fraction of the $1 trillion U.S. market and could offer greater opportunities for expansion. Vanguard Group last year rolled out a slate of six Canadian ETFs.

The ETF market “is still in the very, very early stages of growth in Canada,” Morningstar analyst John Gabriel said.

Most Canadian financial advisers currently work on a commission, or fee per transaction, basis and thus favor selling mutual funds, he said. ETFs took off in the United States as brokers and advisers switched to rely on charging annual account fees.

Canadian ETFs will become more popular as the market evolves away from relying on commissions, Gabriel said. “It’s the coiled spring,” he said.

Reporting By Aaron Pressman; Editing by Phil Berlowitz and Gerald E. McCormick

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