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Thursday, March 31, 2005

Fund Mergers Down in 2004

Reported by Theresa Sim

The total number of fund mergers in 2004 was down from the past two years, but relatively high compared to the past ten years.

In the last year, 479 mutual fund share classes merged into other existing funds, compared to 781 in 2003 and 714 in 2002, according to Standard & Poors.

2004 data marks the first sharp reversal in the number of fund mergers, which have been largely increasing since 1994. In 19994, only 124 funds merged, growing to 300 in 1997, 401 in 1999 and 774 in 2001.

Farewell, Funds
Year Number of Mergers
1994 124
1995 253
1996 267
1997 300
1998 449
1999 401
2000 548
2001 774
2002 714
2003 781
2004 479
Source: Standard & Poors data
In aggregate, the acquiring funds of 2004 performed slightly better than the merged funds of 2004. Acquiring funds returned 24.2 percent in 2003, compared to 22.6 for merged funds.

But breaking the data out by fund investment style reveals that merging funds' 2003 performance did not always beat acquired funds' performance.

Mid Cap Growth acquired funds returned an average of 34 percent in 2003, while acquiring funds returned an average of 32.5 percent. Acquiring Mid Cap Value funds returned an average of 21.9 percent in 2003 compared to 30.3 percent for acquired funds.

Transamerica's IDEX fund family completed 82 share class mergers in 2004, the most of any fund family.  

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