Jerry Szilagyi continues to expand Huntington, New York-based Catalyst Funds' [profile] lineup through M&A, this time bringing 15 mutual funds into the fold via two deals. And he's also bringing Catalyst into the variable annuity, ETF, and money market fund businesses.

Jerry Szilagyi Catalyst Funds Chief Executive Officer, Co-Founder, Portfolio Manager

Last week Szilagyi unveiled a deal to buy Coral Gables, Florida-based TCG Financial Services' 10 non-traditional money market funds: the TCG US Government Ultra Money Market Fund, the TCG US Government Select Money Market Fund, the TCG US Government Premier Money Market Fund, the TCG US Government Max Money Market Fund, the TCG US Government Primary Liquidity Money Market Fund, the TCG US Government Advantage Money Market Fund, the TCG Liquid Assets Government Money Market Fund, the TCG Liquidity Plus Government Money Market Fund, the TCG Daily Liquidity Government Money Market Fund, and the TCG Cash Reserve Government Money Market Fund. The funds invest mainly in FDIC-insured bank deposits, as well as some government securities.

Szilagyi confirms that, though he's "not directly" bringing TCG staff over to Catalyst, he will be keeping TCG on as a research and administrative services vendor.

"We're doing the deal because of distribution," Jorge Coloma, PM at TCG, tells MFWire.

As for the TCG funds, Szilagyi is using them as cash holdings in Catalyst Funds and for some institutional investors.

"We're looking for some alternative cash management opportunities for our existing funds. The nature of the investment strategies of some of the Catalyst Funds causes us to hold some significant cash balances," Szilagyi tells MFWire. "These funds will give us a higher return than the existing investments we use to hold cash."

Catalyst has already boosted the TCG funds' AUM to $105 million, from $5 million, thanks to just a few days of investing Catalyst funds' cash into the TCG funds. And he's moving more. Catalyst has about $2.6 billion in total AUM.

"We're not really offering those funds to retail investors through our normal distribution outlets," Szilagyi adds.

Meanwhile, last week Catalyst and another mutual fund shop, Pittsburgh-based Federated Investors [profile], agreed to split Columbus, Ohio-based Huntington National Bank's mutual fund business in two and buy the pieces. Federated unveiled a deal to buy up Huntington's money market fund business, which includes two funds and about $1.1 billion in AUM. And Catalyst unveiled a deal to buy Huntington's fund shop itself, Huntington Asset Advisors [profile], and to take over five other Huntington mutual funds as well as two VAs and two ETFs, totaling about $350 million in AUM.

"Like many other banks, we have entered into an agreement to transition the funds to financial firms that have the appropriate expertise and scale in this highly competitive market," Huntington spokesman Seth Seymour tells MFWire in an e-mailed statement. "Both firms have a strong reputation and a solid track record of customer service."

"We are talking to a few people [at Huntington Asset Advisors] about potentially bringing them over," Szilagyi says.

"The strategic nature of the variable annuities and the ETFs," Szilagyi adds, was "one of the primary drivers" of Catalyst doing the Huntington deal.

"About a dozen colleagues are employed by the funds. No final decisions have been made for all of these colleagues," Seymour says in his emailed statement. "They are eligible to apply for other jobs in Huntington and will be given transition pay and outplacement services."

Dan Brewer is the president of Huntington Asset Advisors.

The Huntington funds being taken over by Catalyst will use the Rational Funds brand. The deal is slated to close in December.

On the Federated side, the deal will reorganize the $236-million Huntington Money Market Fund into the existing Federated Prime Cash Obligations Fund. And the $870-million Huntington U.S. Treasury Money Market Fund will be reorganized into the existing Federated Treasury Obligations Fund. Federated had $349.7 billion in total AUM as of June 30, and it has done a host of money fund acquisitions over the years.

"Personally, I've dealt with Huntington for 20-plus years," Joe Mackie, director of alliances at Federated, tells MFWire. "We were a known quantity, a solid long-term partner of theirs."

This isn't even Huntington's first mutual fund deal with Federated. Last year Federated bought five Huntington fixed income mutual funds and reorganized them into Federated ones.

Mackie confirms that "no personnel are moving" to Federated as part of Federated's Huntington deal. This is the third money fund Federated has unveiled so far this year, for a combined $5 billion in total AUM moving.

"We've probably averaged three or so deals a year," Mackie says. "We've probably done the most in the industry in terms of number of deals."

Meanwhile, Huntington Asset Services, Inc., which does a host of back-office services for other fund firms and supports more than $45 billion in assets, will continue to be led by president Jeff Young and be part of the bank.

"It is business as usual for HASI, which will continue to serve its client base," Huntington's Seymour says in his emailed statement. "Huntington also will continue to provide custody services for Catalyst, which is a longtime client."

Pricing and terms for both the TCG deal and the Huntington deals were not disclosed. Federated expects to seal its Huntington deal sometime next quarter. 

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