Goldman to battle private equity for iShares

The auction for Barclays Capital’s ETF management business has the investment banking group pitted against a selection of private equity firms including Hellman & Friedman, Bain and TPG. Vanguard, a US-based investment management firm, is also mounting a bid.

A group of private equity bidders, including Hellman & Friedman, Bain Capital and TPG, is circling iShares, the ETF business being auctioned by investment banking group Barclays Capital.

Two trade buyers, investment bank Goldman Sachs and US-based investment management firm Vanguard, are also bidding, according to market sources.

ETFs: 45% of BGI's revenue stream

Media reports have pegged the potential deal’s value at up to £6.5 billion (€7 billion; $9.5 billion).

A source said the Hellman & Friedman consortium includes UK-based Apax Partners and US firms Colony Capital and The Carlyle Group, and is likely to bid in the region of $5.5 billion. Another source said it was too early to speculate on the size and viability of the various bids, as they had yet to be submitted.

ETFs – or exchange traded funds – are listed investment vehicles popular among investors because they typically offer the diversification, low expense ratios, and tax efficiency of index funds, while still maintaining all the features of ordinary stock.

iShares is a growing part of Barclays Global Investors (BGI) and now provides around 45 percent of its £1.84 billion in revenues. BGI is a subsidiary of the investment banking group Barclays Capital. Parent company Barclays Group has, unlike its rivals The Royal Bank of Scotland and Lloyds TSB, avoided giving up a stake to the UK government, instead choosing to raise more than £5 billion from Middle Eastern investors last year.

Goldman, Carlyle Group and Hellman declined to comment, while Vanguard, Bain, TPG and Apax did not immediately respond to requests for comment.