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Wednesday, October 10, 2012

Why Harbor Makes Sense for AMG

Reported by Tommy Fernandez

So a partnership between AMG [profile] and European PE firm Permira is in the running to purchase Robeco [profile], the parent company of Harbor Capital Advisors [profile]. [You can read about the other Robeco bidders here.]

Harbor would make plenty of sense for AMG chief Sean Healey. First, adding Harbor's distribution team would be a huge boost. Second, combining Harbor's manager-of-managers model with AMG's rollup strategy would give Healey the flexibility to expand his line without buying boutique managers. And as a bonus, it would bring a fund subadvised by Bill Gross under the AMG label -- giving the firm a bigger presence in fixed income.

It should be noted that both Robeco and AMG declined to comment to MFWire on this subject.

AMG has made a name for itself as an asset management rollup, buying at least partial ownership in investment boutiques and then marketing their funds under its umbrella brand. It has done so with at least 25 affiliate asset managers, which then manage AMG-branded funds. AMG manages a total of $385 billion.

Harbor is a manager of managers, growing its product lines by forging partnerships with a variety of sub-advisors -- most notably fixed-income investing goliath Pimco [profile], which managed the $7.9 billion Harbor Bond Fund. Harbor has $65 billion under management.

Acquiring Harbor and its Gross-managed fund would give Healey a stronger presence in fixed-income. AMG is primarily known for its equity funds.

Combining Harbor's and AMG's philosophies towards subadvisors would improve AMG's flexibility, but the real kicker would be Harbor's formidable distribution operations, led by Hugh Kelly. Kelly is president of Harbor Funds Distributors whose distribution chops earned him a place on MFWire's Influencers list.

Adding Kelly's team to AMG's own distribution operations would give Healey a lot of sales market power, plus flexibility -- just in case he would want to start offering a wider range of funds managed by non-affiliates. Earlier this week former AMG affiliate Essex Investment Management bought back the 51 percent of its shares previously owned by AMG in order to become 100 percent employee owned.  

Correction: A prior version of this story gave an out of date AUM figure for AMG. AMG manages $385 billion.

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