USAA Sells Its AM Arm, For $850MM Up Front
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Wednesday, November 07, 2018

USAA Sells Its AM Arm, For $850MM Up Front

USAA is selling its asset management arm, yet that doesn't mean the USAA brand will disappear from the mutual fund and ETF world.

David C. Brown
Victory Capital Holdings, Inc.
Chairman, CEO
Cleveland-based Victory Capital Holdings [profile] has agreed to buy San Antonio-based USAA Asset Management Company [profile], Victory chairman and CEO Dave Brown confirmed yesterday after market close. Publicly traded Victory (VCTR on the Nasdaq) will pay $850 million up front, plus possible contingency payments. The deal is expected to close in Q2 2019.

Stuart Blain Parker
USAA Asset Management (which offers mutual funds, ETFs, and 529s, but excludes USAA's Managed Money brokerage product) had $69.2 billion in AUM as of September 30, so the up front price tag translates into 1.2 percent of its AUM. Victory had $63.64 billion in AUM as of September 30 and is expected to more than double its AUM to $144.4 billion after the deal closes.

The deal will turn USAA Asset Management into Victory's 11th investment franchise, and it will keep the right to use the USAA brand on funds. The Victory team also plans to keep a big presence in San Antonio.

Citywire, My San Antonio, P&I, and the San Antonio Business Journal all covered the news.

Brown describes the deal as both a scale play and a distribution one, as well as an investment diversification win. USAA, founded in 1922, is a diversified financial services giant that specializes in particular on serving members (past and present) of the U.S. armed forces and their families. Across the whole company, USAA has 12.4 million members and 32,700 employees, as of the end of 2017.

Daniel Sean McNamara
President, Financial Advice & Solutions Group
"The acquisition of USAA Asset Management Company is a strong diversifier for us with the addition of quality investment teams and products and provides us entry into a new distribution channel with a loyal member base," Victory's Brown states. "It increases our size and scale, enhances our ability to attract and retain top investment talent, and leverages our investments in critical components of our business, such as technology, operations, investment support and client service, across a broader base of assets."

Donald Keith Sloane
USAA Investment Management
Head of Intermediary Distribution
"We believe Victory Capital is well positioned to provide a broader selection of leading-edge investment solutions to our members over the long term while maintaining the high standards of service that our members expect," states Stuart Parker, CEO of all of USAA. "We are committed to working with employees and members to ensure a smooth transition."

USAA traditionally distributed its mutual funds primarily through its own members, but that changed a few years ago. The deal with Victory comes five years after Dan McNamara, now president of USAA's financial advice and solutions group (that includes USAA Asset Management), hired veteran fundster Keith Sloane to build out third-party distribution of USAA's funds.

Yesterday the Victory team also reported Q3 2018 earnings per diluted share of adjusted net income with tax benefit of $0.45, beating expectations by $0.03. Victory brought in $108.1 million in Q3 2018 revenue, $750,000 ahead of expectations, and AUM rose 2.2 percent in the quarter.

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