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Rating:Federated Stays Email Routing List Email & Route  Print Print
Tuesday, March 24, 2015

Federated Stays "Very Active" in Deals, Agreeing to One and Prepping Another

Reported by Neil Anderson, Managing Editor

Federated Investors [profile] just unveiled one acquisition and is prepping another. The Pittsburgh-based money market mutual fund giant has done many money fund deals over the years and is still hungry for more.

"We are committed to the business for the long term," Joe Machi, director of alliances at Federated, tells MFWire. "We'd love to be a solution for people if they're a good fit."

On Monday, March 16 Federated unveiled "exclusive discussions" with Reich & Tang [profile] to potentially offer a landing spot for the latter's money market mutual fund shareholders. Four days earlier, Reich & Tang chief Michael Lydon revealed plans to leave the mutual fund side of its business entirely and liquidate the funds. If the two sides agree on a deal and receive the blessing of fund shareholders, the Federated folks expect that the deal would be done by the end of July.

"Reich and Tang made a decision to exit the money fund business," Machi says. "We are finalizing an agreement with them."

Separately, on Friday, March 20, Federated unveiled a deal to buy assets of the Touchstone Ohio Tax-Free Money Market Fund [profile]. If approved by fund shareholders, the deal would move $91-million in money fund assets into the $391-million Federated Ohio Municipal Cash Trust, and the Federated team expects the deal to close next quarter.

"[Touchstone] decided to exit the money fund portion of their business," Machi says, adding that Federated "has a tremendous amount of experience with these kind of transactions."

"In light of the changing regulatory landscape with respect to money market funds, we sought a party that had a commitment to the money market fund business," states Steve Graziano, president of Touchstone Investments.

Machi predicts that, given the pressures of the prolonged low-interest rate market environment and the "regulatory changes coming down the pipeline," Federated will continue to do "more of these kinds of transactions."

"People are taking a hard look at their products," Machi says. Fundsters, he adds, are wondering , if it's "worth going through all this hassle and change and additional risk and cost and effort."

As of December 31, Federated worked with $362.9 billion, including about $184 billion in the Federated Money Market Obligations Trust alone. 

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