Private equity and merchant banking firms think there is money to be made in the booming exchange-traded fund business.
Investors hope to find the next PowerShares, which has become the poster child of entrepreneurial ETF success. The firm — acquired for $60 million by AMVESCAP PLC earlier this year — had amassed $9.15 billion in assets as of Dec. 18, about three years since it launched its first two funds.
AMVESCAP's purchase of PowerShares "opened up people's eyes" to the growth potential, said Ben Cukier, a partner with venture capital firm FTV Management Co. LLC, San Francisco. "I have received calls from countless entrepreneurs … who all want to be the next PowerShares." FTV invested $10 million in PowerShares Capital Management LLC, Wheaton, Ill., in 2005.
The global ETF market is expected to hit $2 trillion in 2010, up from $469 billion in June, according to Celent LLC, a New York research firm.
That growth rate has venture capitalists and merchant bankers looking for the next hot ETF provider.
FTV officials expect to announce an ETF financing commitment in early January that will be "similarly sized" to the PowerShares investment, Mr. Cukier said.