Jovian sells ETF business

Jovian Capital Corporation has entered into a definitive agreement to sell its exchange traded fund (ETF) business to South Korea’s Mirae Asset Global Investments Co., Ltd.

“We are pleased to have reached an agreement with Mirae,” said Philip Armstrong, CEO of Jovian. “Since our initial investment in this start-up company in 2006, the ETF business has flourished and grown to over $3 billion in assets under management today. This transaction represents a substantial return on our investment in the ETF business and is consistent with our mandate to create value for our shareholders by building great financial services companies.”

The deal is conditional on the completion of a number of obligations by both parties up to, and including, the closing date, which is slated for 120 days from now. The transaction is also subject to regulatory and contractual consents and approvals, both domestic and foreign.

The sale values the ETF business at about $150 million, with Jovian expected to receive about $90 million. Mirae has also purchased some of the equity of the minority shareholders—largely the executives of the various pieces of the ETF business—but each minority shareholders is retaining an undisclosed portion of the company.

“Mirae Asset respects the management skills of BetaPro and sees them as an integral part of the future of Mirae Asset,” said Hyeon-Joo Park, chairman and founder of the South Korean buyer. “Mirae Asset is traditionally very strong in actively managed products and through this transaction we expect to offer our clients a more diversified product line-up with a varied and high quality suite of ETF products.”

The sale includes:

  • a 58% stake in BetaPro Management Inc., the manager of the Horizons BetaPro family of ETFs, along with a portion of the shares of BetaPro held by its minority shareholders;
  • AlphaPro Management Inc., a subsidiary of BetaPro and the manager and trustee of the actively managed Horizons AlphaPro family of ETFs;
  • BetaPro’s 40% interest in BetaShares Holdings Pty. Ltd., the parent company of BetaShares Capital Ltd., an Australian company that offers ETFs on the Australian Securities Exchange;
  • Jovian’s wholly-owned subsidiary Horizons Exchange Traded Funds Inc., which provides sales, marketing and client service for the entire suite of Horizons ETFs; and
  • Jovian’s wholly-owned subsidiary JovInvestment Management Inc., a provider of investment advisory and administration services to a broad range of clients, including ETFs, public mutual funds, closed-end funds, hedge funds and principal protected notes.

Hahn Investment Stewards & Company Inc. is not part of the deal, and remains in Jovian’s portfolio of wealth managers, which includes Leon Frazer & Associates Inc., T.E. Wealth, MGI Securities Inc. and MGI Financial Inc.

“We are very pleased to be partnering with Mirae to continue to grow our business and expand into other international markets,” said Adam Felesky, CEO of BetaPro and AlphaPro. “Mirae is South Korea’s largest mutual fund manager and has tremendous global reach. With their support, we look to continue developing innovative new ETF products to meet growing demand from investors in Canada and internationally.”

The Canadian ETF market is heating up, with Vanguard and RBC planning to enter the space. With US$53 billion in assets under management, Mirae has deep pockets to back up its new Canadian unit.

The Horizons family of 70 ETFs consists of about $3 billion in assets under management. Mirae has its own line of about 30 ETFs, under the Mirae Asset TIGER brand, listed on the South Korean and Hong Kong stock exchanges.

“The Asian ETF market is getting ready to explode,” said Howard Atkinson, president of BetaPro. “[Mirae] is totally committed to growing a global ETF business. That allows us to continue to launch products not only in Canada, but also sell and market those ETFs abroad.”

Mirae’s expertise lies in emerging market investment, and Atkinson does not rule out launching actively managed ETFs that leverage this focus.

“They approach emerging markets a little bit differently; instead of looking at it by country, they look at the middle class emerging in terms of consumerism. They believe the future is in holding pieces of companies that will benefit from the rise of the middle class.”