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Rating:UPDATE 1 | Done Deal: San Fran Fund Shop Steps Forward to Gain Sales Access Not Rated 3.5 Email Routing List Email & Route  Print Print
Wednesday, June 4, 2008

UPDATE 1 | Done Deal: San Fran Fund Shop Steps Forward to Gain Sales Access

Reported by Erin Kello

In an apparent bid to gain distribution scale, San Francisco-based Forward Funds [see profile] is buying Seattle-based Accessor Capital Management. Both fund shops use a sub-advised fund business model, potentially smoothing the integration of the two firms and creating a strategic fit.

The desire to add lifestyle funds to its repertoire played into Forward's decision to buy Accessor.

"We were looking for expansion into the lifestyle fund business, of which Accessor had a very successful one," J. Alan Reid, Jr., president of Forward Management, told the MFWire in an interview.

Reid added that the deal made sense because there was no overlap in funds or personnel between the two companies. Accessor currently has four sales professionals who focus on regional banks and trusts, while Forward has 12 salespeople who focus on the RIA, b-d and retirement channels.

J. Anthony Whatley, founder and president of Accessor funds was equally satisfied by the deal.

"We thought this was an arrangment where one plus one equals four or five," he told the MFWire in an interview, adding that, "The clients of both fund families will be better served."

After the deal closes, Forward Funds will have 34 mutual funds and more than $5 billion in AUM (see chart below for the largest sub-advised funds specialists). The larger asset base will help the mutual fund firm build distribution scale. That scale creates efficiencies in reaching the fund supermarkets and in branding, and it offers the potential for reducing sales costs.

"The addition of the Accessor Funds to the Forward family diversifies our product offerings, including our alternatives strategies," Reid stated in a release, "and we are excited about the opportunities we have to continue developing innovative investment options for investors."

Forward Funds was founded in 1998 with the backing of Gordon Getty, an heir to the Getty oil fortune. It last acquired a fund business in March of 2005 when it adopted the Emerald Funds.

While the deal promises to restructure the business operations of the fund firms, it will not result in immediate changes for shareholders in the funds. Accessor's key investment professionals will remain at Forward and the Accessor brand will remain on the firm's funds.

Whatley will assume the role of vice chairman at Forward Funds and will head the Investment Policy Committee after the merger is complete, according to officials at the two firms.

The last big sub-advisory deal occurred in April when Lighthouse Holdings, backed by Pharos Capital Group and TPG Capital, unveiled unveiled a deal to buy American Beacon, the fund arm of American Airlines.

Largest Sub-Advised Fund Families
Rank Firm AUM, $MM (2/2008)
1 Vanguard Group $1,371,955
2 SEI Corporation $76,405
3 Fidelity Distributors $73,349
4 Harbor Capital Advisors, Inc. $42,014
5 Hartford (The) $41,882
6 Russell Investment Group $32,584
7 John Hancock $30,456
8 Columbia Management Group $29,569
9 Transamerica IDEX Management $18,761
10 American Beacon Funds. $18,612
11 USAA Investment Management Co. $17,098
12 PIMCO Advisors $16,851
13 DWS Scudder $16,763
14 Principal Financial $16,761
15 GuideStone Capital Management $13,858
16 Vantagepoint Investment Adviso $12,576
17 Nationwide Financial $12,359
18 Evergreen Investments $12,353
19 MassMutual $11,909
20 Diversified Investment Advisors $11,541
Source: Financial Research Corp., Boston, MA

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