Federated Investors Inc.
) closed a deal under which, Federated acquired assets worth $929
million from Performance Funds Trust, a wing of Trustmark.
Increased assets under management furnish Federated with various
new fund offerings that would benefit its clients.
Trustmark Investment Advisors Inc, which operates as a subsidiary
of Trustmark, acted as investment adviser to Performance Funds.
Following the closure of the deal, Trustmark will no longer act as
investment adviser to Performance Funds and these funds will be
The money market fund managers are under pressure due to the
lingering low interest rate environment and the increasing number
of regulations. Therefore, Federated came up with the plan of
buying more mutual fund assets to enhance its business in
strategically important segments.
Terms of the Deal
Under the agreement, Federated, one of the largest investment
managers, reorganized four equity, two fixed income and two money
market Performance Funds. Federated merged these acquired assets
into its seven existing funds, which possess the same investment
objectives, after Performance Funds' shareholders approval on
Moreover, Trustmark Investment Advisors sold certain assets which
were related to the management of the Performance Funds to
Federated and some Federated advisory subsidiaries.
For quite sometime, Federated has been working with different banks
to offer investment products catering 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 access a wider array of investment
products. Federated is looking forward to many such opportunities
in order to provide cream services to its clients.
Similar Acquisitions in the Past
This deal marks Federated's third consecutive completed transaction
of acquiring assets since the beginning of 2012. Earlier in
September, Federated acquired money market assets worth $4.4
billion from four Fifth Third money market funds of Fifth Third
Asset Management Inc. (FTAM), the asset management subsidiary of
Fifth Third Bancorp
). These assets were merged into four existing Federated money
market funds, which have the same investment objectives.
Previously, in April, 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 Fund.
Federated has the potential to grow in the long run on the back of
its diversified asset and product mix, global expansion and 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.
However, 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.
FEDERATED INVST (FII): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
TRUSTMARK CP (TRMK): Free Stock Analysis Report
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