Risk management solution buys to boost SGX's profits

Scientific Beta grew its assets under replication by 10 times in four years.

The Singapore Exchange (SGX) is expected to continue benefiting from a strong demand for risk management instruments, as it pursues investment opportunities starting with its planned acquisition of independent index provider Scientific Beta, reported DBS Group Research.

According to SGX, this independent index provider, specialising in factor-based and risk-managed solutions, grew its assets under replication by 10 times in four years to $74.06m (US$54.7b) and is currently profitable with revenues of about $29.87m (EUR20m).

The report also noted the acquisition’s potential linkages with SGX’s product platform and opportunities for cross-selling, given its relationships with over 60 asset owners and asset managers, mainly from Europe and the US.

SGX is acquiring a 93% stake in Scientific Beta for $280m (EUR186m), funded through external borrowings. The exchange shared that it is looking for various investment opportunities and bolt-on acquisitions to fuel growth, especially in the fixed income, currencies and commodities (FICC) and data, connectivity and indices (DCI) space.

The local bourse reported a 3% YoY net profit of $99m in Q2, with strong growth in FICC and DCI offsetting weaker performance from equities.