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Rating:Bear Hug Squeezes Fund Assets Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, April 05, 2001

Bear Hug Squeezes Fund Assets

Reported by Sean Hanna, Editor in Chief

For the first time since the start of the mutual fund boom that began in the late Eighties, the fund industry is facing a protracted downturn. Some may say it is a typhoon. The Nasdaq is now at a level barely changed from the first quarter of 1998. Meanwhile, the Dow has been stuck in a trading range for about 24 months. So how are fund firms faring?

To find out, we asked Financial Research Corporation to run some basic numbers. The period covered is from March 31, 2000 (roughly the peak of the Nasdaq) through January 31, 2001 (the most recent data available).

Those numbers reveal that the industry is splintering into two groups. One, which consists of the largest and most diversified complexes, is weathering the storm just fine so far. The second already has all hands bailing out the ship.

Of 583 fund firms tracked by FRC, more than one hundred (103 to be exact) have seen their mutual fund assets under management shrivel by more than 25 percent since the Nasdaq peak at the end of March 2000. Meanwhile, when all fund complexes are counted, the industry assets base has fallen by just 6.3 percent.

Translated into dollars and cents, that group has seen nearly $47 billion disappear under the waves, while the entire industry has shrunk by $235 billion. Most of the firms suffering asset declines of 25 percent or more are smaller firms and many are specialists.

None of the largest 25 fund firms has suffered such a large drop in assets and as a group they lost just 6.3 percent of their assets through the end of January.

Weathering the Storm
($ Bil)
($ Bil)
in Assets
in Assets
The 103 Meeting Criteria$141.5$94.633.11%$46.8
Largest 25 Complexes$3,437.2$3,201.96.85%$235.3
All Funds$4,827.9$4,519.26.39%$308.7
Source: Financial Research Corp.

For firms looking for distressed sellers, one place to start may be the list below. Each of these firms has seen its fund complex shrink by more than a quarter. They are all substantial enough for that to translate into a one billion dollar hit.

Taking on Water?
($ Bil)
($ Bil)
in Assets
in Assets
Munder Capital Management $17.6 $10.5 -40.6% $7.1
Seligman Marketing Inc. $23.3 $17.0 -27.3% $6.4
Deutsche Asset Management $14.0 $10.4 -25.4% $3.5
Warburg Pincus Counsellors $10.6 $7.6 -28.8% $3.1
RS Investment Mgmt $8.7 $6.2 -29.2% $2.5
Rydex Funds $7.0 $4.9 -29.6% $2.1
Standish, Ayer & Wood $5.6 $3.9 -29.5% $1.7
Montgomery Asset Mgt. $3.7 $2.2 -40.8% $1.5
Ivy Funds $3.4 $1.9 -42.6% $1.4
Marsico Capital Management $4.7 $3.3 -28.5% $1.3
ProFunds Advisors $2.2 $1.0 -56.9% $1.3
Van Wagoner $3.3 $2.1 -35.7% $1.2
AMR Investment Services, Inc. $4.3 $3.2 -25.5% $1.1
Barclays Glbl Investors Funds $3.9 $2.9 -27.4% $1.1
Kinetics Asset Management $1.6 $0.6 -63.4% $1.0
Source: Financial Research Corp.

Although none of these firms admits openly that it is selling, at least one -- Standish, Ayer & Wood -- is reportedly on the block. This week Pensions & Investments reported that Mellon Financial is in talks to purchase the manager. Standish is known as a fixed income shop and has the bulk of its $43.5 billion of assets in separate accounts managed for qualified plans. The rumored price tag falls in the range of $500 to $800 million in that deal, or less than 2 percent of assets under management.

Other firms contacted by MutualFundWire.com are putting on a brave face as the market turns. Both Munder and Ivy Funds are starting new marketing campaigns (although Ivy has also cut staff). Meanwhile, Kinetics is talking about going on a buying spree of its own and purchasing value-focused firms. It also reportedly has funds in registration.

A few of the firms on the list are the safe harbor of a deep-pocketed parent. These include Marsico (owned by Bank of America) , Deutsche Funds, Barclays, Warburg Pincus, and AMR Investment Services (owned by AMR, the parent of American Airlines).

Tomorrow we look at the firms gaining assets during the storm. 

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