On Monday, Cincinnati-based
Fifth Third Bancorp
) announced its exit from the mutual fund business after vending
most of the assets. Fifth Third Asset Management Inc. (FTAM), the
asset management subsidiary of Fifth Third, completed two
transactions to sell off its mutual fund assets, which was
announced in April. However, the company will continue as
sub-advisor to some of the mutual funds.
FEDERATED INVST (FII): Free Stock Analysis
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Money market fund managers are under pressure owing to the
lingering low interest rate environment and tightening regulations.
Therefore, Fifth Third came up with the plan of selling mutual fund
assets to minimize risk and bolster its business in strategically
Under the first agreement,
Federated Investors Inc.
), one of the largest investment managers, acquired money market
assets worth $4.4 billion from four Fifth Third money market funds.
These assets were merged into four existing Federated money market
funds, which have the same investment objectives.
The second deal was completed with Cincinnati-based Touchstone
Advisors Inc., a unit of Western & Southern Financial Group. As
per the agreement, Touchstone has acquired assets of 16 stock and
bond mutual funds worth $3 billion from Fifth Third. The
consummation of the acquisition took the total sum of Touchstone's
funds to 47 and total assets under management to $13.5 billion.
After-Effects of the Deals
The completion of the deals has aided FTAM to concentrate on its
core strengths by providing institutionally managed active asset
management strategies. Moreover, the company will now be able to
offer a wider range of investment products to its clients.
For a long time, Federated has been working with banks to offer
investment products to fit the needs of the clients. Therefore,
Federated's experience coupled with Fifth Third's proficiency in
credit analysis and fundamental research will help the latter in
the evolution of these assets. Moreover, Federated looks forward to
many such opportunities to provide quality services to its clients.
Further, increased assets under management give Touchstone various
new fund offerings that would benefit its clients. These
acquisitions, however, are not expected to have a material impact
on Fifth Third's results.
Going forward, we believe that a diversified traditional banking
platform positions Fifth Third well for future growth. Though a
tepid economic recovery, a low interest rate environment as well as
regulatory changes remain the major headwinds, we believe that the
company's proactive steps will help it sail through these
Fifth Third currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating. However, considering the
fundamentals, we maintain a long term Neutral rating on the