So, Barclays PLC has sold its iShares family of exchange-traded funds to CVC Capital Partners Group, one of the top five private-equity firms in the world. Are higher management expense ratios (MERs) coming for iShares investors?
Blogger Canadian Financial DIY fears this may be the case – perhaps less so in the U.S. where there are several competing, low-cost offerings but more so in Canada where the choices are limited.
The sale appears to be the usual leveraged buyout. CVC Capital is putting up just $1.05 billion of the purchase price with Barclays itself providing $3.1 billion of debt financing to CVC Capital. Will CVC Capital now be squeezing iShares to wring out as much profit as possible to meet debt charges? Their website would have us believe that they won’t try and extract every cent:
“CVC focuses on building businesses over the long-term, typically holding investments for five years or more …. CVC believes that the effective ownership and management of a company creates benefits for all stakeholders, from employees to customers, suppliers to shareholders and the wider community …. “
The buyout aside, do Canadian investors in iShares have another thing to concern them? On April 1, Barclays Global Investors Services Canada Limited resigned its membership in the Investment Industry Regulatory Organization of Canada, the Canadian regulator responsible for investor protection when it comes to overseeing investment dealers and investment funds.