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Rating:Reserve Plans Acquisitions Not Rated 3.0 Email Routing List Email & Route  Print Print
Wednesday, April 19, 2000

Reserve Plans Acquisitions

Reported by Jason Shank

New York's Reserve Funds will be actively pursuing a strategy of acquisition over the next year or two, said Bruce Bent II, senior vice president and son of the company's founder, Bruce Bent. Bent says that his firm will probably acquire two to four small funds ($100 million in assets or less) this year and will continue the strategy until Reserve has acquired all the funds "it can digest."

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"We have a real appreciation for the entrepreneurial spirit," said Bent II. "When my father started the first money market fund, people weren't exactly beating down our doors to put money in, so we appreciate the difficulty that a small fund can have in terms of distribution and back-office."

Bent said that, in his mind, the acquisitions would be more like partnerships. Reserve would acquire the fund and transfer ownership to one of its own trusts, becoming the fund's advisor. The firm will provide back-office services, but the fund's investment manager would then stay on as sub-advisor. Bent added that the point was to find "the best possible managers and let them do what they do best."

Reserve currently has six equity funds with a total of $110 million in assets, all sub-advised, and has been quite active of late to promote this side of its business because the company is still mostly known for its successful $7 billion money market fund business. The firm's policy is to provide all the necessary services for its equity funds, from marketing to transfer agent to sales; however, Reserve executives don't want to be the portfolio managers for these funds.

The new acquisition strategy evolved through the process of searching for sub-advisors to start new funds for Reserve. That process revealed several money managers who had started their own funds and were struggling with the sales and marketing of the funds, and had also out-sourced the servicing to another firm, also adding to the managers' expenses. Bent said that several funds approached Reserve to provide the back-office for their funds, but that Reserve wasn't interested in pursuing that business in lieu of its present strategy.

Reserve is currently in talks with two funds, Bent reported. The acquisition road could possibly add to more than the planned four next year, or even fewer funds with assets bigger than $100 million. 

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