Turner Investments Holding, an active shop and now Veracen affiliate, announced on Wednesday that it would acquire exchange-traded fund specialist Elkhorn Capital Group. The terms of the deal were not announced, but the transaction is expected to close in the next few weeks.
This deal shows how the rise of ETFs has put the hurt on active funds, but also how competitive the ETF industry has become.
Berwyn, Penn.-based Turner will shutter its three existing mutual funds Mid-cap Growth (TMGFX), Small Cap Growth (TSCEX), and Titan Long/Short (TSPCX), which collectively have just $135 million in assets as of July, according to Morningstar Direct. At its peak in 2008, the firm managed some $28 billion. The message behind the closures: “We as a firm are moving away from traditional active management,” Erik Hagar, senior portfolio analyst and at Turner told Barron’sin a telephone interview.
With help from Elkhorn, which has 13 ETFs and was formerly a part of Invesco’s global ETF business, Turner plans to launch factor-based ETFs. “We want to be where we can solve a problem and be a solution in the ETF space,” says Hagar. “We won’t compete against the S&P 500 ETFs — they’re essentially free.”
Elkhorn’s Ben Fulton, a Barron’s ETF Roundtable participant, says the deal was also strategic for their firm. “You need to have a larger presence in the ETF space especially now,” he says. “Turner was introduced to us as they were going through a metamorphosis. We like the technology and there’s a lot of excitement and energy to bring the two cultures together.” Fulton will be appointed head of global ETFs for the newly formed company.