UK / US - Barclays is in talks with a US-based private equity firm over the sale of its iShares exchange traded fund business, Global Pensions has learned.
A source familiar with the situation said the negotiations are "far advanced" and that any deal will likely include "a lot of seller financing."
But he also said that TA Associates and Hellman and Friedman - both private equity firms active in the fund management markets - were not involved.
Market watchers say the timing for the sale is ideal.
The source said: "It is the best time - growth is strong, profits are high, and the ETF business is not so packed with prima donna portfolio managers as conventional asset management."
Despite this, another industry source, who declined to be named, said Barclays' ETF business had an unsustainably strong reputation.
He said Barclays has a very high cost structure and believed the firm would have to cut costs in order to remain competitive.
The consultant to money managers said "the perception of growth in this business" was greater than he expects actual growth to be.
Consultants had speculated the most likely option would be a management buy-out - but also believed Vanguard, the US mutual fund firm, could be interested in the business.
They also said a large bank distributor - such as Deutsche Bank, which runs db x-trackers - could also make a bid for the division.
However, the source familiar with the negotiations said it was unlikely the buyer would be another asset management firm looking to grow its ETF business as "none of the strategics are strong enough".
A Barclays spokesman said: "We've held discussion with potentially interested groups, but no decision has been made yet."
The sale of the iShares business is likely to have little impact on institutional investors that invest with Barclays Global Investors, said one pension consultant.
Angeles Investment Advisors principal and chief investment officer Michael Rosen said: "The ETF business is a small part of BGI, and essentially is pure passive products. BGI retains their full capabilities in traditional passive approaches as well as their value-added quantitative strategies and a research team that is second-to-none in the industry."
He added: "I don't expect this to be a material event for institutional clients."
The talks over the sale of iShares comes as Barclays confirmed it is in dialogue with HM Treasury and the Financial Services Authority regarding its potential participation in the government's Asset Protection Scheme.
It said its decision whether and to what extent to participate in the scheme would be based on the economic merits to shareholders of any such participation.
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