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Exclusive: Guggenheim reorganizes, phases out Rydex ETF

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By Jessica Toonkel

NEW YORK (Reuters) - Guggenheim Partners LLC is merging 11 asset management businesses into a new $119 billion firm as part of a rebranding effort to attract financial advisers and institutional clients.

The company is renaming its asset management business Guggenheim Investments and putting that moniker on its RydexShares exchange-traded funds and most of its Rydex mutual funds.

Guggenheim led a group of investors that acquired Rydex SGI's parent, Security Benefit Corp, last year.

The reorganization positions Guggenheim to compete more effectively with giants such as BlackRock Inc <BLK.N> and Pacific Investment Management Co as well as rivals in niche asset classes such as alternative investments.

"From a product and distribution standpoint they have better breadth," said Christian Magoon, an ETF consultant and former president of Claymore Securities. The challenge will be "giving the different product lines sufficient distribution and marketing support."

Guggenheim's ETF complex will have $12 billion of assets, ranking it as the eighth largest provider of ETFs in the U.S., according to Lipper. The entire company will oversee $24.1 billion of U.S. mutual fund assets.

It also will be one of a handful of asset managers to offer active and passive ETFs as well as open-end and closed-end funds, including BlackRock and PIMCO.

Guggenheim announced the change via Webcast to its 1,200 investment management employees on Tuesday.

Richard Goldman, Rydex's former chief executive and now chief operating officer of the reorganized firm, said he's looking forward to gaining ground against competitors such as JPMorgan <JPM.N>, Natixis and Goldman Sachs <GS.N> in real estate, hedge and other alternative fund products.

About 12 percent of the company's assets were in alternatives as of June 30.

Founded in 2000, the New York-based company's roots come from managing money for the Guggenheim family. The firm moved into institutional asset management in 2001, specializing in fixed income.

In 2009 Guggenheim made its first push into the retail space when it bought Claymore Group, then the 13th largest U.S. ETF provider, with $1.6 billion under management.

Claymore's funds, which were rebranded under the Guggenheim name last year, have traditionally been distributed through broker-dealers such as Bank of America Merrill Lynch <BAC.N> and Morgan Stanley <MS.N>.

In 2010 the Rydex acquisition gave Guggenheim entree to registered investment advisers and a strong menu of equity products.

Guggenheim is in the process of adapting some of its institutional strategies for the retail market.

In early September, it filed with the U.S. Securities and Exchange Commission to launch the Guggenheim Macro Opportunities, Total Return Bond, Floating Rate Income and Municipal Income Funds -- all versions of current institutional strategies, Goldman said.

Guggenheim will keep the Rydex name on its popular Target Beta Funds, aimed at active traders. The funds now have $7 billion of assets.

Rydex built its reputation around niche strategies such as a pair of leveraged ETFs and several popular equal-weighted ETFs, said Paul Justice, an ETF analyst at Morningstar Inc. He said some advisers found these gimmicky, so eliminating the Rydex name from the higher-brow Guggenheim makes sense for branding.

One consultant, however, was scratching his head over the strategy. Under the new organization, Guggenheim ranks as only the 58th largest fund company, according to Lipper.

"Sure we all know the Guggenheim Museum in New York, but what does that brand really mean?" said Geoff Bobroff, a fund consultant.

(Reporting by Jessica Toonkel; Editing by Jennifer Merritt and Walden Siew)

(This story was corrected to show that Guggenheim Partners LLC will not change its name)