PowerShares Deal Tied To Revenue Targets

by: Unauthorized Participant

The big news yesterday was that Amvescap, London-based parent company of the AIM mutual funds, acquired PowerShares. PowerShares has been one of the hottest ETF managers of the past couple of years with their semi-actively managed funds.

Expect to hear a lot more out of PowerShares over the next few years. Why? More than 90% of the acquisition's total proceeds are tied to the company’s meeting revenue targets, according to Dow Jones. In the mutual fund business — ETF or conventional — there are only two ways to increase revenue: charge higher fees or increase assets under management. And in the current climate of ever lower expense ratios, the first one is going to be tough to pull off.

So Bruce Bond and company are now under a lot of pressure to increase assets under management, which likely means more new ETFs, more hype about existing funds, more CNBC appearances for Bruce Bond, etc.

Related: Amvescap Buys PowerShares