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Rating:Goldman Buys $1 Bn Fund Group, But Why? Not Rated 5.0 Email Routing List Email & Route  Print Print
Friday, December 3, 2004

Goldman Buys $1 Bn Fund Group, But Why?

by: Theresa Sim

Goldman Sachs is tacking on another $1.1 billion in mutual fund assets to its approximately $26 billion fund group, adding approximately four percent to its total fund assets. The Compass Asset Management-advised Expedition fund group will merge its six funds into Goldman funds pending shareholder approval in February.

What does Goldman hope to accomplish with this small potatoes acquisition, the Wall Street heavyweight's second this year?

You can rule out increased distribution. Compass Bank, a regional bank with offices in Alabama, Arizona, Colorado, Florida, New Mexico and Texas, already offers Goldman funds to its business customers as part of its treasury management services.

That Goldman is not gaining distribution as part of the deal means that the firm's motivation is likely a pure asset grab, in line with its late-July acquisition of six of Citizens Bank's Golden Oak funds, worth less than $465 million in total assets. Citizens Bank, also a regional bank, serves the Mid Atlantic and Northeast area.

And given Expedition's dwindling assets and the high cost of doing business, Compass was eager to comply: "the infrastructure and oversight (and associated costs) needed to comply with new regulations recently promulgated by the [SEC] have placed significantly greater regulatory and economic burdens on CAM and the Expedition Funds," officials stated in a Goldman SEC filing.

The assets of Expedition's Equity Fund, Equity Income Fund, Investment Grade Bond Fund, Tax-Free Investment Grade Bond Fund, Money Market Fund and Tax-Free Money Market Fund will find new homes in Goldman funds with similar investment objectives.

Each Goldman fund has lower operating expenses than its corresponding merged Expedition fund, according to the filing.  

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