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Rating:Orbitex To Enter 401k Market Not Rated 3.0 Email Routing List Email & Route  Print Print
Friday, October 22, 1999

Orbitex To Enter 401k Market

Reported by Hayley Green

Orbitex Financial Services Group, based in New York said today it is acquiring Clarke Lanzen Skalla Investment Firm (CLS), an independent fee-based asset management firm with about $1 billion in assets and two mutual funds.

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"The combination of CLS and Orbitex brings us closer to our goal of becoming a diversified investment management firm. In addition to enhancing our product line and distribution efforts, we have obtained a very talented management team who will strengthen our firm as we continue to expand," Richard Stierwalt, co-chairman and CEO of Orbitex said.

Stierwalt told the MutualFundWire.com that Orbitex is aggressively looking to expand its business and widen the distribution of its funds.

The acquisition of CLS gives Orbitex an additional outlet for fund distribution and additional funds. Stierwalt said that CLS has two lifestyle funds; he plans to leverage those portfolios by launching two additional lifestyle funds.

CLS primarily distributes its funds though financial planners and brokers. Orbitex's purchase will allow it to utilize the additional contacts and mutual fund outlets.

Stierwalt indicated that the acquisition of CLS is just the beginning of many to come. He said he is interested in buying a utility fund or changing the current natural research fund to include utilities.

In a more aggressive move, Stierwalt said he is also looking to get involved in the defined contribution/401(k) market. "Looking forward, in five years it is going to be an even faster growing segment of the market. When the market toppled last week it didn't stop people from depositing money into their 401(k) plans," he said.

Stierwalt said he does not plan on going head-to-head with the giant providers like Vanguard and Fidelity but will instead create automated services and products for third-party administrators or TPAs.

"We are going to focus on the TPA market which is a fragmented market," Stierwalt said. "I think if we can come in with young services, we will have a better opportunity to penetrate the market."

The strategy might have some promise, providing Orbitex's entrance into the market both reinforces and supports its potential TPA partners. But the problem of finding its place in the 401(k) food chain leaves at least one industry observer a bit skeptical.

"I wish them luck, but this is a pretty crowded marketplace, with the defined contribution arena becoming more and more of a commoditized environment," said Ward Harris, president, McHenry Consulting. "In order to succeed, they'll probably have to form non-traditional alliances, with non-traditional distribution partnerships."

"(Orbitex's strategy) sounds similar to what Alliance, Columbia, and American Funds have been doing a good job of for some time," explained Harris.

Stierwalt would not specify about what deals Orbitex currently has on the table would say that they will be done by year's end. "That's right, December 31, 1999."  

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