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Rating:A Franklin Boutique Lifts Out a $2.7B-AUM Team Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, February 03, 2021

A Franklin Boutique Lifts Out a $2.7B-AUM Team

Reported by Neil Anderson, Managing Editor

One of Franklin Resources' boutiques is poised to lift out a high yield fixed income team in the Midwest.

Heather E. Brilliant
Diamond Hill Investment Group, Inc.
President and CEO
Today Adam Spector (managing partner at Philadelphia-based Brandywine Global Investment Management, LLC and executive vice president and head of global distribution at San Mateo California-based Franklin Templeton, dba for Franklin Resources, Brandywine's parent), David Hoffman (chairman and head of global fixed income at Brandywine), and Heather Brilliant (CEO of Columbus, Ohio-based Diamond Hill Investment Group, Inc.) confirmed that Brandywine has agreed to buy the high yield-focused, U.S. corporate credit mutual fund business from Diamond Hill Capital Management (Diamond Hill Investment Group's active asset management subsidiary). Diamond Hill PMs John McClain and Bill Zox, and Diamond Hill fixed income senior associate Jack Parker, are expected to join Brandywine as part of the deal.

The deal includes a pair of five-star mutual funds: the Diamond Hill Corporate Credit Fund, which had $2 billion in AUM as of December 31, and the Diamond Hill High Yield Fund, which had $724 million in AUM. (As of December 31, Brandywine had $63.9 billion in AUM, out of Franklin's $1.498 trillion. Diamond Hill had $26.3 billion.)

Pending shareholder approval and other steps, the deal is expected to close next quarter (i.e. Q2 2021).

Spector puts the deal in the context of Brandywine's "commitment to hiring exceptional investment talent." He lauds Diamond Hill's Zox, Parker, and McClain for their "strong track record" and describes the trio as a good "cultural fit" for Brandywine.

"All three of them share our dedication to value, respect for diverse viewpoints and willingness to challenge conventional thinking," Spector states.

"Our existing credit-oriented strategies rely on a dynamic interchange between top-down macro research and bottom-up analysis," Brandywine's Hoffman states. "The fundamental research capabilities that John, Bill and Jack bring will be a welcome addition that will ultimately enhance the service we provide to our clients."

Brilliant notes that Diamond Hill will continue to offer other, non-high yield fixed income strategies (like core bond and short duration securitized bond) from other PMs.

"Though we are moving away from high yield corporate credit strategies, we continue to develop new, long-term-oriented investment offerings that meet client objectives, capitalize on our investment team's research capabilities, and align with our investment strategies," Brilliant states. "This transaction is the result of thoughtful review and ongoing conversations between Diamond Hill and portfolio managers McClain and Zox to determine the ideal platform and infrastructure for the high yield-focused funds and the funds' shareholders. We believe shareholders of both funds will be well-served in this new home."

McClain joined Diamond Hill as a credit analyst in 2014 and rose to PM the next year. He previously worked with Standard Life Investments and Nationwide. He is an alumnus of Carnegie Mellon University and the University of Kentucky.

Zox joined Diamond Hill in 2001 as an investment analyst, rose to PM in 2004, and eventually served as CIO of fixed income for four years. Earlier, he worked with Schottenstein, Zox & Dunn. He is an alumnus of the University of Florida College of Law, Ohio State University's College of Law, and Williams College.

Parker interned at Diamond Hill while attending Ohio State University's Fisher College of Business, then he joined the firm as an analyst in 2015. 

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