Federated Investors Inc.
) entered into a deal under which, Federated will acquire assets
worth $903 million from Performance Funds Trust, a wing of
Trustmark. Increased assets under management give Federated various
new fund offerings that would benefit its clients.
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Trustmark National Bank is a subsidiary of Trustmark, while
Trustmark Investment Advisors Inc. operates as a wholly-owned
subsidiary of Trustmark National Bank and acts as investment
adviser to Performance Funds.
The money market fund managers are under pressure attributable to
the lingering low interest rates environment and the increasing
number of firm regulations. Therefore, Federated came up with the
plan of buying more mutual fund assets to grow its business in
strategically important segments.
Under the agreement, Federated, one of the largest investment
managers, will acquire money market mutual fund assets worth $571
billion from eight funds of Performance Funds Trust. Moreover, the
remaining assets will be purchased in fixed income and equities.
Federated will merge these acquired assets into its existing seven
funds having same investment objectives. The financial terms of the
transaction were undisclosed. Moreover, on the closure of the deal,
Trustmark will no longer act as investment adviser to Performance
The agreement awaits certain regulatory approvals and consent of
the shareholders of Performance Funds. The meeting between
Performance Funds Trust's board and its shareholders is expected to
take place in September 2012.
For quite a long time, Federated has been working with different
banks to offer investment products according to the needs of the
clients. Therefore, Federated's experience, coupled with its
proficiency in providing customer service, will be opportunistic
for Performance Funds' shareholders. Moreover, the completion
of deal will enable the shareholders to have an access to a wider
choice of investment products. Federated is looking forward to many
such opportunities in order to provide cream services to its
This deal marks Federated's third consecutive announcement of
acquiring assets since the beginning of 2012. In April 2012,
Federated completed the expansion of its operation in United
Kingdom by acquiring London-based Prime Rate Capital Management,
LLP from Matrix Group Limited. The firm provides institutional
liquidity and fixed-income products. UCITS (Undertakings for
Collective Investments in Transferable Securities) products,
offered by Prime Rate, include Prime Rate Sterling Liquidity Fund,
Prime Rate Euro Liquidity Fund and Prime Rate US Dollar Liquidity
Further, Federated announced a definitive agreement to acquire
money market assets worth $5 billion from four Fifth Third money
market funds, which will be merged into Federated's existing four
money market funds having same investment objectives. The agreement
is anticipated to be closed in the third quarter of 2012.
Federated has the potential to grow in the long run on the back of
its diversified asset and product mix, and global expansion along
with a fairly healthy balance sheet. Going forward, management
expects to maintain this balanced growth structure.
Moreover, investors' increased demand for the company's wide range
of income-oriented products will help it increase profitability. In
addition to this, certain factors like regulatory backdrop, waning
equity markets and sluggish global economic growth, will likely
keep the earnings under pressure.
Federated currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we also
maintain our long-term 'Neutral' recommendation on the shares.