(Reuters) - Goldman Sachs will acquire exchange-traded funds provider Neos Investments for as much as $2.25 billion, as the investment bank looks to bolster its presence in active asset management.
Neos manages $30 billion in assets across 19 ETFs that cover a suite of index products, while using options to generate additional income and cap downside risk.
Demand for such products has surged of late, as institutions look to hedge portfolios with investments that help cushion drawdown risk and provide recurring income in a volatile market environment.
Goldman has pursued acquisitions in the actively managed ETF space to strengthen its asset management unit and capitalize on the growing demand.
The Wall Street giant completed the $2 billion buyout of Innovator Capital, which also employs an options-based ETF, earlier this year.
"The deal capitalizes on the accelerating adoption of derivative income ETFs and deepens durable A&WM (asset and wealth management) revenues," analysts at Jefferies said in a note.
Neos has returned about 19% over a one-year period through June in its flagship S&P 500 high-income ETF, while total returns in the fund since inception are close to 15%, according to the firm's website.
"As investor demand for active ETFs grows, Neos' disciplined investment approach is highly complementary to our capabilities across buffer, managed outcome and income strategies," Goldman CEO David Solomon said in a statement.
Investment banks across Wall Street are also leaning on their asset management businesses for steadier revenue to counter the vagaries of hard-to-predict investment banking and trading growth.
Goldman reported net revenue of $4.6 billion from its asset and wealth management segment in the second quarter, a 20% jump from the same period a year earlier.
Its purchase of Neos, expected to close in the first quarter of 2027, will propel its active ETFs to $80 billion. Post-acquisition, Neos co-founders Troy Cates and Garrett Paolella will join the bank as partners.
Reporting by Utkarsh Shetti in Bengaluru; Editing by Leroy Leo
Source: Reuters