Acquisitions Upon Buy Side

Terry Flanagan

Like many other players struggling for growth, buy side firms are acquiring.

Touchstone Advisors, a wholly owned subsidiary of Western & Southern Financial Group, announced this week that it was to acquire selected assets of Old Mutual Asset Management (OMAM)’s U.S. mutual fund business.

The acquisition will total $10 million in assets under management for Cincinnati-based Touchstone Investments, and add several new sub-advisors to its current roster of fund managers. The firm is primarily known for its sub-advisor model.

Its parent company, Western & Southern Financial Group, which offers a variety of financial services, currently manages north of $53 billion.
OMAN is a global multi-boutique investment organization, managing and growing both institutional and individual portfolios of asset managers amounting to an estimated $260 billion. Its parent is London-based Old Mutual plc.

Such a deal comes at a time when merger and acquisition activity is on the rise. In 2010, M&A activity overall gained by a reported 23 percent, resulting in 2.4 billion of M&A revenue generated worldwide. Fifty five percent of deals were concentrated in financial services.

“This transaction is a perfect fit with Touchstone’s business model. Touchstone hires leading institutional money managers, experts in their respective asset classes, to sub-advise Touchstone Funds,” said Steven Graziano, president of Touchstone Investments. “The addition of Old Mutual’s affiliated investment managers will increase the range of funds we offer and fills the gaps in our current lineup with boutique managers who have strong, long-term performance records.”

Both firms are confident that merging signals a “strategic partnership leverages each company’s core strengths,” noted in a statement.
The final details of the transaction is expected to be completed early in the second quarter of 2012, at which time, seventeen Old Mutual Funds will be reorganized into Touchstone Funds with OMAM’s affiliated investment managers continuing as sub-advisors to a significant majority of those funds.

“Our partnership with Touchstone allows Old Mutual to focus on what we do best, namely manage institutionally-driven, active asset management strategies through our affiliates,” said Peter Bain, chief executive of OMAN.

“Touchstone’s reach and expertise in distributing sub-advised mutual funds is the right complement to our business and will provide investors and their advisors better access to our affiliates’ investment strategies. We believe this transaction is in the best interests of (our) mutual fund shareholders and we look forward to working with our partners at Touchstone on an ongoing basis.”

Following the closing of the transaction, it is expected that there will be no material changes in the investment strategies employed by the reorganized Old Mutual Funds.

Though, it is anticipated that many of the funds will be marketed under the Touchstone brand.

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