Corporate MovesAugust 3, 2023

TCW Group Acquires Engine No. 1’s ETF Business

The San Francisco-based firm’s Transform platform manages more than $600 million in US equity ETFs.

Reported by Michael Katz

Asset management firm TCW Group has acquired San Francisco-based investment firm Engine No. 1’s exchange-traded fund business, along with its infrastructure, ETF portfolio managers and staff. The ETFs focus on supply chain onshoring, and energy transition. Financial terms of the deal were not disclosed.

Under the deal, Los Angeles-based TCW is acquiring all of Engine No. 1’s Transform ETF platform, which includes the active, thematic Transform Climate ETF, Transform Supply Chain ETFand the Transform 500 ETF index fund. The Transform ETF platform manages more than $600 million in U.S. equity ETFs that are focused on supply chain onshoring and energy transition.

According to TCW, the acquisition of the Transform ETF platform will provide it with the infrastructure to build out a larger ETF platform. The company also expects Engine No. 1’s capabilities to complement TCW’s existing thematic strategies in artificial intelligence, space technology, next-generation mobility and renewable energy infrastructure. The acquisition expands the range of TCW’s investment products that emphasize “sustainable investing grounded in economic realities,” according to the company.

The acquisition, expected to close in the third quarter, must be approved by shareholders.

“We’ve built a tremendous ETF business at Engine No. 1, and we’re extremely excited by the opportunity to scale it even more quickly as part of TCW,” Jennifer Grancio, CEO and architect of Engine No. 1’s ETF business, said in a release. “The active, thematic focus of the Transform ETFs fits incredibly well into TCW’s growth strategy, and we’re thrilled to help drive the firm’s expansion into new investment solutions.”

According to corporate and investment bank Natixis, equity ETF inflows have fallen “dramatically” in 2023 from 2022’s “more stable flow activity,” while fixed-income ETF net flows have been “consistently strong and positive” during the first half of the year. However, the bank’s ETF outlook for the second half of 2023 also noted that “current market conditions favor investors preferring active management, as significant market volatility has created opportunities for active managers.”