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The combination of BlackRock Asset Management Canada Ltd.’s and RBC Global Asset Management Inc.’s (RBC GAM) ETFs businesses into a single family, RBC iShares, will prove to be greater than the sum of their parts, suggests a new report from Moody’s Investors Service Inc.

“This strategic alliance creates the largest and most comprehensive ETF offering in Canada, including index, factor, quantitative and active strategies with $60 billion of [assets under management],” the credit-rating agency’s report states. “We expect that the combination of these two leading brands in the Canadian asset-management market will expand their ETF businesses in Canada beyond what each would have achieved individually, creating revenue synergies and scale, a credit positive in each case.”

Although BlackRock Canada still is the ETF market share leader in Canada, its current share (36%) is less than half of what it was back in 2012, when it had a market share of almost 80% after acquiring Claymore Investments Inc, the Moody’s report notes: “Since then, players with more direct access to proprietary distribution have gained share.”

In contrast, RBC GAM has lagged in the ETF market, despite its parent bank’s large distribution network, with only about a 3% market share. Together, both firms should be better off, the Moody’s report suggests.

“For RBC GAM, asset management requires comparatively little risk-weighted capital. In addition, greater assets under management provide economies of scale and asset-management growth initiatives leverage RBC GAM’s existing core competencies,” the Moody’s report says.

At the same time, the report adds that “Blackrock will benefit from an alliance with one of Canada’s leading manufacturers of asset management products with strong institutional and retail distribution support in Canada.”