Warburg Pincus recruits ETF expert

The firm has hired ex-iShares boss Lee Kranefuss to help source deals in this small but fast-growing market segment

Warburg Pincus, the US-headquartered growth investor, has appointed Lee Kranefuss as an Executive-in-Residence. His role will be to assist the firm in identifying deals in the exchange-traded funds market in Europe, Asia and Latin America.

Kranefuss was previously CEO of iShares, the largest issuer of ETFs worldwide. As a director of strategy & corporate development at Barclays Global Investors, the owner of iShares, he teamed up with ETF inventor Nate Most to spearhead a series of fund launches and acquisitions that established iShares as the leading ETF provider in less than a decade. Launched in 2000, iShares accumulated over $600 billion under management by 2010.

In addition to iShares, Kranefuss also ran BGI’s institutional indexing and asset management businesses, which had total assets of more than $1.5 trillion. He left iShares following the acquisition of BGI by Blackrock in 2009, a deal that was valued at $13.5 billion.

His appointment is intended to underpin Warburg’s bid to enter a fast-growing market. “ETFs and passive investing are powerful investment tools globally, and continue to see long-term inflows,” Kranefuss said in a statement. “The time is ripe to create a large-scale, global, and independent ETF provider that will provide the truly attractive and innovative product – and the support behind it – that ETF investors demand.”

ETFs are tradeable funds that hold stocks, commodities and bonds. They typically track a stock or bond index, and have recently risen in popularity thanks to their low-cost, tax efficiency, and stock-like features.

Private equity firms have shown an interest in the sector before. Before Blackrock’s bid for BGI, Barclays had received an offer from London-based CVC – the first sign that large-cap investors were ready to make substantial bets on in a relatively new class of assets. This latest move by Warburg shows that other firms are also looking to increase their exposure to the asset management industry.

The deal is also consistent with Warburg’s track record in financial services, Kranefuss said: the firm has invested more than $5.5 billion in the sector since its inception.

Warburg has a history of recruiting external operating executives to source and lead industry-specific deals, having appointed Brian Reinsborough and George Kurtz as Executives-in-Residence earlier this year. Both went on to lead companies backed by the firm: Reinsborough with Venari, an off-shore exploration and production business, and Kurtz with Crowdstrike, a security start-up.