Guggenheim Is in Talks to Spin Off Its Repo Business

(Bloomberg) -- Guggenheim Partners, the firm where Wall Street veteran Alan Schwartz is chairman, is planning to spin off a business specializing in repurchase agreements that it started about two years ago, according to people familiar with the plan.

The business that started as Guggenheim Liquid Markets, now listed as GLM Securities, might seek external capital while the firm keeps a stake, said the people, who asked not to be identified discussing a private matter. The move would make the unit independent from Guggenheim’s investment bank.

Guggenheim has been seeking to find a way to muscle into a $3 trillion market, largely dominated by big banks, that finances trading in government bonds. Newer regulations and capital requirements have made it expensive for those banks to hold low-yielding assets such as repo agreements, which are short-term transactions for secured loans, from overnight to as long as two years, that are collateralized by government debt or mortgage-backed securities.

To read about Guggenheim’s repo push, click here.

By separating the GLM business, Guggenheim expects that it can expand faster, the people said. The unit registered with the Financial Industry Regulatory Authority in September of 2016 and at the end of last year it only had about $426,000 in assets, according to a regulatory filing.

Guggenheim isn’t the only non-bank to see a big opportunity in the repo market. The investment firm founded by Bob Diamond, the former leader of Barclays Plc, in recent years has invested in South Street Securities, a U.S. broker-dealer that specializes in borrowing and lending money in securities repurchase markets.

A spokesman for Guggenheim declined to comment.

--With assistance from John Gittelsohn.

To contact the reporters on this story: Sonali Basak in New York at sbasak7@bloomberg.net;Alexandra Harris in New York at aharris48@bloomberg.net;Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Dan Reichl, Steve Dickson

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