Nasdaq to Acquire Smart Beta Firm

Nasdaq announced that it will acquire smart beta and passive investing specialist Dorsey, Wright & Associates LLC.

Dorsey, Wright & Associates (DWA) will add smart beta strategies to Nasdaq’s index portfolio offerings, bringing model-based investing strategies and data analytics support to financial advisers. The deal is expected to close in the first quarter of 2015.

According to the firms, DWA will increase Nasdaq’s capacity for growth in the index business across asset classes and geographies, especially in the area of index licensing. The combined group will bring together DWA’s 17 exchange-traded funds (ETFs) and Nasdaq’s 69 licensed smart-beta ETFs, which focus primarily on dividend and income strategies.

As a result of the deal, Nasdaq Global Indexes will reach nearly $45 billion in assets benchmarked to its family of smart-beta indexes—and more than $105 billion benchmarked to all Nasdaq indexes.

“Our index business has been a strong growth area for Nasdaq over the last decade, and the acquisition of Dorsey, Wright & Associates will further cement our position as a major player and industry innovator,” suggests Adena Friedman, president of Nasdaq. “We are always looking for opportunities to expand Nasdaq’s index offering with quality products that deepen our relationships with the investing community. DWA provides a natural complement to our business and growth strategy.”

Subject to customary regulatory conditions and approvals, Nasdaq will acquire DWA for $225 million, funded through a mix of debt and cash. Nasdaq says it intends to fuel DWA’s growth strategy by accelerating product development, raising awareness of the DWA indexes and increasing the base of potential market participation through its global distribution network. The firms hope to develop products in more asset classes—including fixed income, currencies and commodities—and facilitate international expansion of DWA offerings in Canada and Europe.

“Smart beta represents one of the fastest growing sectors within the ETF market,” adds Tom Dorsey, president of DWA. “This deal will allow us to grow significantly while continuing to create products and strategies that meet the needs of our clients.”

Additionally, there are opportunities for Nasdaq technology to enhance DWA’s digitally based adviser tools, used to deliver DWA’s methodology into tactical asset-allocation models. The firms say their collaboration will create more product and service opportunities for financial advisers as the market continues to move toward model-based investing.

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