Guggenheim eyes combining Claymore and Rydex, sources say

Melding of two acquired units would create seventh-largest ETF provider; 'scale business'.

Guggenheim Partners LLC is discussing combining its former Claymore Group Inc. exchange-traded fund business with its Rydex SGI business, according to people familiar with the situation.

The merger, if completed, would result in the seventh-largest ETF provider in the U.S. with $11 billion in assets, according to Morningstar Inc.

Guggenheim bought Claymore in October 2009. The following February, the firm was the lead investor in buying Security Benefit Corp., which owns Rydex SGI, a provider of ETFs and mutual funds. Last September, Guggenheim rebranded the former Claymore business to become Guggenheim Funds Investment Advisors LLC.

At the time of that acquisition, Todd Boely, managing partner in the office of the chief executive of Guggenheim Partners, told InvestmentNews that there were no plans to integrate the two ETF providers. He did say that “longer term, we’ll be looking at lot of things related to how to optimize the business.”
As part of those talks, the firm now is discussing integrating the two businesses to gain scale and allow its wholesalers to sell both ETFs and Rydex’ mutual funds, sources familiar with the situation said. The challenge is that Guggenheim, although the lead investor in Security Benefit, either has to buy out the other investors or convince them to allow the integration, said one person familiar with the discussions.
Jeff Kelly, a spokesman for Guggenheim Capital Partners, didn’t return calls for comment by press time. Calls to Security Benefit were referred to Jeaneen Pisarra, a spokeswoman at Rydex, who declined to comment.
If the integration does go through, the firm will combine the 350 employees on the Rydex side with the 200 employees on the Guggenheim Funds Investment Advisors.

There’s no word yet on the roles Rydex SGI chief executive Rich Goldman, or Donald Cacciapaglia, president and chief operating officer of Guggenheim’s investment management business, would play in combined unit.
Combining the two businesses makes a lot of sense for Guggenheim because it will create a bigger business and allow its wholesalers to sell Rydex and Guggenheim ETFs, as well as Rydex mutual funds, said Scott Burns, director of ETF research at Morningstar.

Rydex, with $8 billion in ETF assets and 0.76% of ETF market share, currently is the ninth-largest seller of exchange traded funds. Guggenheim, with $3 billion in assets, has 0.34% market share and is ranked 14th, according to Morningstar.

“ETFs are ultimately a scale business, so the more scale you have the better you will be,” Mr. Burns said.