LSE Group in $2.7 billion deal for Russell Investments

Agreement creates a titan in ETF indexes and gives Russell fund business a new owner

Jun 26, 2014 @ 10:42 am

By Trevor Hunnicutt

exchange-traded funds, etfs, russell investments, lse group, ishares, msci, S&P
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LSE Group, owner of the London Stock Exchange, has agreed to acquire Russell Investments for $2.7 billion. (Bloomberg News)

The London Stock Exchange Group said Thursday that it plans to acquire Russell Investments in a $2.7 billion deal that marks a new phase for the target, a storied investment consultant, money manager and index builder.

If the deal with seller Northwestern Mutual Life Insurance Co. goes through, it will also create the second-largest index provider of U.S.-listed exchange-traded funds by combining Russell Indexes, maker of indexes including the popular small-stock Russell 2000 benchmark, as well as FTSE, another popular ETF benchmark whose producer is also under LSE Group's aegis.

As of Wednesday, the two were linked to ETFs managing nearly $278 billion in assets, according to XTF.com, a data provider.

That's second to McGraw Hill Financial's Standard & Poor's benchmarks, with $641 billion, but outpaces a close competitor, MSCI Inc., with $262 billion.

More than $5 trillion in assets are benchmarked to Russell's U.S. indexes in total.

The deal will be watched closely, not just for its impact on the ETF space, but also for its impact on Russell Investments, whose money management unit oversees $260 billion, including in mutual funds covering most major asset classes.

Mergers and acquisitions involving asset management companies are watched closely for signs that the acquirer may try to spin the firm off or that the corporate culture might be affected in a way that could affect fund performance.

Len Brennan, president and chief executive of Russell, will join LSE Group's executive committee after the sale goes through, LSE Group said.

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