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Monday, January 08, 2001

Brandy from Wine

Reported by Tamiko Toland

The evolution of Old Mutual's subsumation of United Asset Management (UAM) has become clearer with the firm's announcement of a new group: Old Mutual Asset Managers (US). The six affiliates in the group will work closely with Pilgrim Baxter, which has long been positioned as the star player from UAM.

Analytic Investors, Barrow, Hanley, Mewhinney & Strauss, Clay Finlay, Dwight Asset Management Company, NWQ Investment Management Company and Provident Investment Counsel have joined OMAM(US).

"[Old Mutual] is going be using Pilgrim Baxter as the platform for their mutual fund activities," said an Old Mutual spokesman. "In doing that, they will probably be using some of the mutual funds in OMAM(US). Usually, they'll be on a sub-advisory basis."

As part of the deal, the firms' earnings will come from profit rather than revenue, increasing their economic involvement with their parents. Furthermore, they will weave their businesses together with Old Mutual's international business, particularly its UK and South African interests, as well as Pilgrim Baxter. Old Mutual has committed the efforts of a management team for OMAM(US) that will help grow the affiliates' businesses. The six affiliates have approximately $70 billion under management, with earnings of $206 million and revenues of $81 million.

"With the creation of OMAM(US), we are able to offer a range of exceptional international investment capabilities both in the US and to our customer base in Europe and southern Africa, and grow these substantially over time," said Kevin Carter, chief executive officer of OMAM(US). "Significant new revenue synergies are obtainable through active cooperation between the affiliates within OMAM(US)."

Old Mutual stated that each asset manager represents a unique contribution to OMAM(US). The group is positioned to provide a comprehensive portfolio of asset classes over a broad range of management styles with little or no duplication among the affiliates. Nonetheless, Old Mutual also added that it has left the door open for other asset managers to join the group.

"I'm sure that any of the affiliates that come into the group will be complementary to what's going on," said the spokesman, adding that "complementary" doesn't necessarily mean "unique." "You can have more than one value firm."

While Old Mutual has stressed it won't be benching the rest of its managers, it has clearly stepped forth with a varsity team. Making the cut may become increasingly difficult if the firm sticks to its mandate of demanding unique attributes from each asset manager. Although Old Mutual is placing its emphasis on OMAM(US), it still will maintain stand-along affiliates. The firm has even gone to the trouble of pointing out that it has signed three-year contracts with some of the old UAM employees, who will serve all the affiliates.

Old Mutual has taken just its first few steps in shaping its US business. Said the spokesman, "Anything right now is possible; this is just the beginning." 

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