Goldman Sachs Group Inc (GS.US) is set to acquire Neos Investments for up to $2.25 billion, expanding its asset management footprint in the rapidly growing active exchange-traded fund (ETF) space.

According to Marc Nachmann, head of Goldman Sachs' asset management division, the cash-and-stock deal will add a fast-growing ETF issuer to the Wall Street giant's expanding product lineup. The relatively young firm, which launched in 2022, oversees nearly two dozen options-based income-focused ETFs with approximately $32 billion in assets under management, data compiled by Bloomberg show.

These funds have drawn significant attention from investors in recent years due to their high yields. Neos packages complex institutional-grade investment strategies into a simplified format, making them accessible to a broader investor base. "Neos has experienced tremendous growth momentum," Nachmann said in an interview. "Active ETFs represent one of the fastest-growing segments within the asset management industry."

Goldman Sachs has been intensifying its efforts in the ETF space in recent months. Late last year, the bank acquired Innovator Capital Management for roughly $2 billion, bringing in a firm known for its "target outcome ETFs." The Neos acquisition further enriches its options-based ETF product suite.

Upon completion of the latest deal, Goldman Sachs' ETF assets under management will rise to approximately $130 billion. Neos, headquartered in Westport, Connecticut, has consistently attracted capital inflows since its 2022 launch, driven by its flagship options strategy fund's high double-digit returns and monthly dividend distributions. The firm also emphasizes that its products are designed to leverage tax advantages, effectively boosting after-tax returns.

Following the transaction, Neos co-founders Troy Cates and Garrett Paolella will join Goldman Sachs Asset Management as partners. The entire Neos team is also expected to transition to the firm.

As of the end of the second quarter, the Goldman Sachs asset and wealth management division led by Nachmann oversaw more than $4 trillion in assets, an increase of over $700 billion year over year. Revenue from the division grew 20% compared to the same period last year. Goldman Sachs executives have repeatedly stated in recent months that the company remains open to further acquisitions, particularly in the private markets space, aiming to compete with larger rivals such as Blackstone Group (BX.US) and KKR & Co (KKR.US) while addressing its own business gaps.