Franklin Templeton buys $6.4 billion money manager O’Shaughnessy

The deal makes Franklin the latest fund company to strike a deal for a direct indexing business. O'Shaughnessy's custom indexing unit, Canvas, has amassed $1.8 billion in assets since it started in 2019.

Franklin Resources Inc. will purchase O’Shaughnessy Asset Management, making it the latest money manager to strike a deal for a customized index business.

With the acquisition, Franklin Templeton, as the asset manager is known, will add O’Shaughnessy’s $6.4 billion in assets under management to the approximately $1.5 trillion it already oversees, according to a statement Thursday from the San Mateo, California-based investment firm. The deal is expected to be completed by the end of this year. Terms weren’t disclosed.

In addition to factor-based investment strategies, Stamford, Connecticut-based O’Shaughnessy has a custom indexing business called Canvas, which started in 2019 and has amassed $1.8 billion in assets. The business of tailoring index strategies to suit a client’s needs is becoming increasingly popular, as it can provide tax advantages and address sustainability concerns.

[More: Direct indexing emerges as must-have tool for tax management, ESG investing]

That’s driving some of the largest money managers in the world to buy custom index firms. BlackRock Inc. purchased Aperio for $1 billion in a deal that closed in February. At the time the deal was announced, Aperio oversaw about $36 billion in assets. Morgan Stanley bought Eaton Vance for more than $7 billion, which included its custom portfolio business Parametric. In July, Vanguard Group announced the first acquisition in its history when it purchased Just Invest.