Goldman Sachs looks primed to launch covered call exchange-traded funds (ETFs) in Europe following its $2.25bn (£1.7bn) acquisition of NEOS Investments.
NEOS, a US focused provider of options-based income ETFS, last week agreed to add its $30bn, 19 fund range to Golman Sachs’ platform, giving the investment bank a total of $130bn in active ETFs, making it the eighth biggest provider in the world.
Troy Cates and Garrett Paoella, co-founders of the business in 2022, will join Goldmans as partners when the deal completes in early 2027.
The move comes eight months after Goldmans bought NEOS rival Innovator Capital with $28bn in a range of defined outcome ETFs.
“With complementary sales and marketing capabilities, we believe there are significant opportunities to grow the firm’s overall ETF franchise as wealth demand continues to grow globally,” said Goldmans.
“The partnership seeks to provide NEOS the scale and resources to strengthen its brand and ability to serve investors in new markets, while preserving the firm’s distinct philosophy,” the bank added.
Derivative income ETFs are one of the fastest-growing ETF categories with compounding annual growth of more than 70% since 2021 lifting their assets to $180bn, according to data provider Morningstar. New York-listed Goldman Sachs manages $4trn in total assets.
In Europe, JP Morgan has led the way with four ETFs in its Premium Income Active range covering Global (JGLN), Nasdaq (JEPQ), US (JEPI) and Europe (JEPE). Global X, UBS and Rex Shares are also active in the market.
Since launching in Europe in April last year, Goldman Sachs has unveiled 14 active ETFs in Dublin offering strategies in systematic equities, corporate credit and government bonds. These hold $1.9bn (£1.5bn) in assets.
Our view
David Batchelor, senior analyst at QuotedData, said: “Goldman Sachs’ acquisition of NEOS looks like a logical next step in its push into active ETFs and could pave the way for a much broader options-based income offering in Europe. Covered call strategies have already proved popular in the US and JP Morgan’s early success shows there is appetite for them among European investors too, particularly those looking for regular income without moving entirely out of equities”.
