New York Life to enter ETF market with acquisition of IndexIQ

NEW YORK (Reuters) - New York Life Insurance Co is jumping into the nearly $2 trillion U.S. exchange-traded funds market with its plan to acquire ETF provider IndexIQ.

The mutual life insurance company said Thursday its asset management business, New York Life Investment Management, was set to acquire Rye Brook, New York-based IndexIQ, well known for its alternative investment strategies.

IndexIQ will become a part of New York Life’s MainStay Investments platform, adding $1.5 billion to MainStay’s $101 billion in assets under management.

“We have been very interested observers of the ETF space for quite some time,” said Drew Lawton, chief executive officer of New York Life Investment Management, in an interview.

The deal underscores the growing weight and popularity of the rapidly expanding ETF market.

For those like New York Life, buying a firm with an existing management team, industry relationships and the necessary regulatory approvals to launch funds facilitates entry to the market.

“We are excited not only about the products that are already in the market, but also about the type of products yet to be launched and what we can do with our existing investment management,” Lawton said.

The deal follows an earlier Reuters report that Goldman Sachs Group was in talks to acquire IndexIQ.

IndexIQ, which has 12 funds including its well-known IQ Hedge Multi-Strategy Tracker ETF, has been focused on so-called liquid alternatives strategies.

“We definitely want to own that space,” said Adam Patti, chief executive officer and founder of IndexIQ, noting he sees room for further product development.

“I think we’re still in the early innings in the ETF market, and there’s a ton of white space out there” for new ETF launches, he said.

For IndexIQ, the deal will expand its distribution footprint to retail and institutional investors on New York Life’s platform.

The transaction is expected to close in the first half of 2015, the company said. The terms of the deal were not disclosed.

Editing by Jonathan Oatis and Bernadette Baum