(Photo: Bloomberg)

State Street and UBS Group are having discussions about the possible merger of their asset-management businesses, according to a report late Friday in The Wall Street Journal that cites people familiar with the matter.

The talks started this year, and the two parties were near an agreement this summer, sources told the Journal; despite the lack of deal involving State Street Global Advisors, the firms “remained in touch.”

State Street executives believe its needs to boost the size of its asset management operations to compete in light of diminishing fees and other industry factors. Larger industry players include BlackRock with $7.8 trillionVanguard with $6.3 trillion Charles Schwab with $5.9 trillion and Fidelity with $3.5 trillion.

“Wonder if this is all about distribution? I still think State Street should push their independence (i.e. that they’re not competing directly w/ advisors), but I guess distribution is king. UBS would certainly provide that … ,” said Nate Geraci, president of RIA The ETF Store in a tweet Friday.

Since buying a rival would be challenging, State Street — which has about $3 trillion in assets in its iShares and other products — looked at the option of striking a joint venture and reached out to several potential partners, including UBS. The two parties had discussed a similar arrangement in 2012, the Journal reports.

State Street also has reportedly considered merging its asset-management unit with Invesco, Bloomberg News reported Friday. This news came a day after State Street said it would be starting planned layoffs next year.

Recent deals reflecting consolidation in the industry include Charles Schwab’s $22 billion purchase of T.D. Ameritrade, and Morgan Stanley’s recent announcement that is is buying Eaton Vance for nearly $7 billion.

Both State Street and UBS declined to comment on the matter.

See: The Schwab Deal Is Done, Now Comes the Heavy Lifting