The recent brouhaha involving T. Rowe Price [profile] and the buyout of Dell is a sign of how far outside their comfort zones mutual fund PMs are willing to go.

Once considered the turf of investment banks, private equity firms and other masters of the universe, buyouts could become a critical battleground for mutual fund managers, according to Fortune.

There are a number of reasons behind this move, according to the magazine. First, investors have become more mobile with their assets. For example, in the case of T. Rowe, the mutual fund shop saw $4.2 billion in net outflows during the fourth quarter last year, despite the fact that assets under management rose 18 percent.

Moreover, firms are being squeezed in terms of fees and demand for performance.

Fortune writer Lauren Silva Laughlin describes it this way:

Being squeezed from all sides, what is a mutual fund manager to do? It is bound to pick some losers sometimes. But with competition so stiff, it can't afford to. Mutual fund managers need to offer investors something more than just decent returns on stocks. Perhaps it should give the average retiree a shot at the buyout business too.

Laughlin writes that there are several ways T. Rowe could break into buyouts. It could try to nudge its way into existing deals, like Dell, by putting up a fight when a deal is announced.  

Edited by: Tommy Fernandez


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