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Nasdaq Boosts Index Business With Dorsey Wright Acquisition

Nasdaq (NDAQ), the exchange operator and provider of indexes for use by exchange traded funds, said Monday it will acquire Dorsey, Wright & Associates (DWA), an independent registered investment advisor that also provides indexes for an array of well-known ETFs.

By combining the 17 ETFs currently using DWA indexes with the 69 benchmarking to Nasdaq indexes, “Nasdaq Global Indexes will become one of the largest providers of smart beta indexes with nearly $45 billion in assets benchmarked to its family of Smart Beta indexes and more than $105 billion benchmarked to all Nasdaq Indexes,” according to a statement issued by New York-based Nasdaq.

Nasdaq will pay $225 million for Virginia-based Dorsey Wright. The deal jibes with previous speculation that Nasdaq has been looking to increase its indexing business in an effort to grab a larger slice of the booming ETF industry. Nasdaq intends to challenge rivals like S&P Dow Jones Indices, MSCI and FTSE Group that have capitalized on the quick growth in ETFs. The greater competition could help drive down fees for indexing, which could trickle down to lower investor expenses.

In 2014, the U.S. exchange traded products industry topped $2 trillion in assets under management. As of Dec. 22, 2014, U.S. ETP assets jumped 18% $1.698 trillion to $2.007 trillion based on positive market performance and net new assets,” according London-based ETF research firm ETFGI. [U.S. ETFs Hit $2 Trillion Milestone]

Dorsey Wright is already a significant player in providing indexes for strategic or smart beta, one of the fastest growing corners of the ETF universe.

“Smart Beta represents one of the fastest growing sectors within the ETF market,” said DWA Tom Dorsey in the statement. “This deal will allow us to grow significantly, while continuing to create products and strategies that meet the needs of our clients.”

Well-known ETFs tracking Dorsey Wright indexes, which are typically rooted in relative strength strategies, include the $311.6 million PowerShares DWA Emerging Markets Momentum Portfolio (PIE) , the $1.6 billion Powershares DWA Momentum Portfolio (PDP) and the $287.4 milion PowerShares DWA SmallCap Momentum Portfolio (DWAS) .

Last year, Invesco’s (IVZ) PowerShares unit, the fourth-largest U.S. ETF provider, shifted 10 of its ETFs, including nine sector funds, to Doresy Wright indexes. [Index Swap Lifts This ETF]

DWA is also the index provider for the First Trust Dorsey Wright Focus 5 ETF (FV) . With over $1.3 billion in assets, FV was the top asset gatherer among the more than 200 ETFs that debuted in 2014.

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.