Grail Advisors, the San Francisco-based ETF issuer known for pioneering the actively-managed ETF space, recently made an interesting filing with the SEC. In the document, Grail announced that it was entering into a letter of intent concerning a transaction involving ownership interests in order to continue its operations, including paying its future obligations under its fee waiver and expense reimbursement agreements. In other words, it appears as if Grail is on the verge of being sold, though there was no indication as to who might be buying the firm (and the exemptive relief to launch active ETFs that it holds).
Should the deal fall through, the SEC filing suggests that the company’s ETFs could be liquidated immediately and that the Board of Trustees of the Trust has the authority to approve the liquidation of each ETF, without shareholder approval. Should this happen it would kill of one of the first companies to explore the active management side of the ETF world, albeit with limited success [read Handicapping The Active ETF Race].
Currently, Grail has five active-management ETFs in its lineup, with aggregate assets of about $20 million. By far the most popular fund from Grail is the RP Focused Large Cap Growth ETF (RWG), which has about $9 million in assets. Grail also offers the RP Growth ETF (RPX) and the first true actively managed ETF, GVT. The company’s fixed income ETF lineup consists of a taxable bond fund (GMTB is an alternative to AGG or BND) and a muni bond ETF (GMMB) [see Best ETF Performers Of 2010].
Grail has had its ups and downs over the last year. In June the company announced a partnership with DoubleLine, and quickly began preparing to bring an actively-managed emerging market bond fund to the market. DoubleLine is the firm founded by investing guru Jeffrey Gundlach, one of the most successful bond investors of the last several decades [see Grail Partners With DoubleLine]. In August, Grail shuttered its actively managed financials and technology ETFs, citing a lack of investor interest.
While anything at this point is pure speculation, a number of sources have begun to suggest that the company is in talks to be acquired by a ‘well-known firm in the money management space‘ suggesting that the funds may live on in a new firm and that one of the original active ETF firms could see its products under new ownership soon.
Disclosure: No positions at time of writing.
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