Russell Plans Acquisition of Active ETF Provider U.S. One

by: Shishir Nigam

Russell Investments has announced that it is intending to acquire U.S. One Inc., a provider of actively-managed ETFs in the US and the advisor behind One Fund (NYSEARCA:ONEF), an active equity ETF with $11.4 million in assets. According to Jim Polisson, Managing Director of Russell’s global ETF business:

The acquisition of U.S. One provides Russell with a platform to play a unique role in this dynamic and fast moving growth arena. By acquiring U.S. One, we can more immediately leverage our proprietary research to extend the options available to investors and include ETFs in our suite of products that we deliver to the marketplace.

As revealed in a proxy statement filed with the SEC, Russell will take on the investment advisory role for ONEF once the acquisition is completed. The acquisition is expected to complete by the end of Q1 2011.

U.S. One has become to the second Active ETF player to become an acquisition target in recent weeks. Just last week, Grail Advisors was in the news after making a filing that indicated a pending acquisition of the company. Bill Thomas, CEO of Grail Advisors, indicated quite clearly that they are in talks with a “well known firm in the money management space that is just as excited about the active ETF space as we are.”

Grail Advisors is of course in a much tighter situation financially than U.S. One as Grail’s filing indicated that if the pending acquisition does not go through, then the firm might have to liquidate its five remaining actively-managed ETFs.

Through the acquisition of U.S. One, Russell will be able to immediately utilize the exemptive relief that U.S. One has received from the SEC already to launch actively-managed ETFs, thereby fast-tracking its move into the space.

At the moment, Russell provides investors predominantly with mutual funds and separate accounts. Even though the company managed $34 billion in assets as of Nov 2010, there are no ETFs in the company’s product line-up. Russell had, in fact, applied for exemptive relief to launch Active ETFs in August 2009 through a 40-APP filing with the SEC.

That filing requested for a broad-ranging relief that would allow the funds to invest in equities or fixed-income, in both US and non-US markets. However, the firm has not yet received an approval from the SEC. U.S. One’s acquisition should now give Russell another avenue to move its ETF product development plans forward.

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