Amvescap to Acquire ETF Firm PowerShares Capital Management

In another sign of the rising appeal of exchange-traded funds as rivals to conventional mutual funds, money management giant Amvescap said Monday it would buy PowerShares Capital Management, a leading sponsor of exchange-traded funds.

Amvescap, parent of the AIM mutual fund family, said it would pay $60 million in cash for PowerShares, and make additional payments in years to come if PowerShares reaches certain management fee targets.

The purchase would give Amvescap about $3.5 billion of assets in 36 exchange-traded funds, or ETFs.

Amvescap, based in London and Atlanta, manages more than $380 billion worldwide.

The ETF business overall still is relatively small, with about $416 billion in assets worldwide, compared with nearly $7 trillion in stock and bond mutual funds.

But ETFs have soared in popularity in recent years as a way for investors to build diversified portfolios of funds that track a wide range of stock and bond indexes. The portfolios have low management fees and trade on major exchanges, allowing investors to buy and sell them at any time during the trading day.

By contrast, most mutual funds can be bought or sold only once a day, at the closing price.

ETFs also have become popular as tools for many fast-moving traders, who typically are shunned by mutual fund firms.

The deal “makes us a significant player in a growing, dynamic market,” said Martin Flanagan, head of Amvescap.

PowerShares, based in Wheaton, Ill., is the fourth-largest ETF manager based on assets.

Amvescap is hoping it can sell the ETFs together with its actively managed mutual funds in so-called brokerage wrap programs, Flanagan said.