State Street, Invesco in Merger Talks: WSJ

Another mega asset manager merger could be underway.

The Wall Street Journal is reporting that Invesco, which has $1.5 trillion in assets, is in talks to merge with State Street’s asset management business, according to “people familiar with the matter,” though no deal is imminent. State Street manages $4.5 trillion.

The combined firm would rank just below BlackRock and Vanguard, which have roughly $9 trillion and $7.5 trillion, respectively, in assets.

Both Both State Street and Invesco declined to comment on what their spokespeople described as “market rumors” and “speculation.”

By midday Invesco shares were up 5.7% while State Street shares were down 2.7%.

Both Invesco and State Street have been acquiring other financial services businesses in recent years. Invesco acquired OppenheimerFunds and Guggenheim Partners’ ETF business, and hedge fund Trian Fund Management took a 9.9% stake last October.

State Street recently announced an agreement to acquire Brown Brothers Harriman & Co.’s investor services unit, which will make it the top provider of asset servicing. In 2018, State Street acquired the financial data firm Charles River Systems. State Street had been in talks last year to merge its investment business with UBS, but no deal was made.

Todd Rosenbluth, head of ETF and mutual fund research at CFRA, said a State Street-Invesco merger could push fund fees even lower, providing “a strong competitor to BlackRock and Vanguard,” which would be beneficial for financial advisors.

He noted that the two firms have “complementary products,” with State Street focused on its market-weighted S&P 500 index ETFs — SPY and SPLG — plus a gold ETF (GLD) and stock sector ETFs, while Invesco hosts among its largest ETFs the equal-weighted S&P 500 indexes (RSP and SPLV) and the growth-oriented QQQ ETF, which tracks the Nasdaq 100.

Dave Nadig, director of ETF research and chief investment officer of ETF Trends, said a State Street-Invesco merger “makes all the sense in the world” in large part because it will help address the “biggest issue both firms face” —distribution.  He noted that any merger will take time. “Merging two giants is different than Invesco buying out Oppenheimer, for example.”

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European Compliance Association

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