Updated with correction
Barclays PLC is likely to retain a stake in iShares — the exchange-traded funds unit of the bank's asset management subsidiary Barclays Global Investors — while selling the bulk of the unit to a consortium of sovereign wealth funds and possibly money managers.
The bank will probably turn first to investors from previous bailouts, including sovereign wealth funds Qatar Investment Authority, Doha, and Temasek Holdings, Singapore.
While few money management companies — including private equity firms — have been ruled out as potential suitors, no obvious front-runners have surfaced, sources said. They said Barclays executives will want buyers with deep pockets, but finding a single purchaser who can finance the deal will be difficult.
Pacific Investment Management Co. is likely to consider buying iShares, the sources said. Competing ETF managers such as Invesco PowerShares Capital Management LLC could also be in the running, particularly in partnership with a private equity firm.
Sources say it's more likely that a private equity firm, not a strategic buyer, will acquire a piece of iShares.
Global private equity firms such as the Blackstone Group, Kohlberg Kravis Roberts & Co. and Madison Dearborn Partners LLC have large pools of capital at their disposal. Even though KKR and Madison Dearborn have lost money investing in Legg Mason Inc. and Nuveen Investments, respectively, iShares might still prove to be an attractive offering at the right price, some sources said.
“iShares is a dominant player in an area that is considered to be high growth,” said Alex Potter, banking analyst at Collins Stewart PLC, an independent investment bank in London.
Officials at BlackRock, GSAM, Fidelity, Charles Schwab, PIMCO, Invesco, Blackstone, KKR and Madison Dearborn either did not return calls or declined to comment ahead of any deal announcement.