HARTFORD, Conn. - Phoenix Duff & Phelps Corp. will be back on the acquisition trail, possibly as early as next year, in its quest to become an $80 billion manager within the next three years.
With backing from a wealthy majority owner, Phoenix Home Life Mutual Insurance Co., Phoenix Duff & Phelps has a mission to "build and buy talent" needed to create a multiline money management firm, with a fully diversified lineup of institutional money management capabilities and retail mutual funds, said Calvin Pederson, president.
But Phoenix Duff & Phelps, with $33 billion under management, will have to take a breather from acquisitions for the rest of this year to "digest" the recent acquisition of two money managers, said Mr. Pedersen.
The deals to buy institutional manager GMG/Seneca Capital Management L.L.C. and Pasadena Capital Corp., parent of Roger Engemann & Associates, both came to fruition in June. GMG/Seneca Capital has about $4 billion and Roger Engemann & Associates manages more than $5.5 billion in six mutual funds. Both are growth equity managers, which will broaden Phoenix Duff & Phelps' own capabilities, which focus on mid- to large-capitalization value stocks on the institutional side. In the retail mutual fund market, the firm tends to run growth equities, using a thematic investment style.
Mr. Pedersen said "a lot of things were in the works for a long time, but things came together all at once this year. We've had a busy 1997 and have spent a lot of money. We need a period of digestion for a little while."
The company was created in 1995 from Phoenix Securities Group and Duff & Phelps Corp. Phoenix Securities was mainly a retail equity mutual fund manager and Duff & Phelps primarily was an institutional fixed-income manager. Phoenix Home Life owns 60% of the stock of the combined publicly traded entity.
Phoenix Duff & Phelps now offers 30 retail mutual funds with about $10.7 billion under management, six institutional mutual funds with $300 million under management, and $22 billion under management for institutional clients, mainly separate accounts.
Since the merger, the company has sought to broaden its product and distribution lines.
A joint venture with Aberdeen Trust, Aberdeen, Scotland, in March 1996 brought additional international investment management capabilities and two retail mutual funds, the Phoenix-Aberdeen New Asia Fund and the Phoenix-Aberdeen Global Small Cap Fund. The style for each fund will be extended later this year for use in managing institutional versions of the fund and for institutional separate accounts.
Phoenix Duff & Phelps, with the monetary backing of Phoenix Home Life, also hired several portfolio managers with proven track records on the value side to fill gaps in asset class coverage.
Christian Bertelsen, formerly the chief investment officer at Dreman Value Advisors Inc., was hired to broaden the firm's value management capabilities. Mr. Bertelsen will focus on small-cap stock investment. He previously was manager of the Kemper-Dreman Contrarian Fund and co-manager of the Kemper-Dreman Small Cap Value Fund.
Steven L. Colton and Dong Hao Zhang both were hired from American Century Investments and will run a new growth and income fund, using a quantitative value strategy. Both were mutual fund managers at American Century.
John D. Kattar became director of research June 30; he came from Baring Asset Management, where he performed both large- and small-cap research and was a portfolio manager. Thomas R. Gilbert was named a senior analyst in early June and will focus on small-cap stocks. Mr. Gilbert was a principal in the private client group at Alex. Brown Investment Management L.P.
"We basically leave the managers we hire alone, in their current location, to manage money as they always have. We have no plans to integrate the new money management firms we've bought into the fold. We want them to keep their offices separate. We don't want to make managers change what they're doing," he said. Mr. Bertelsen, for example, will remain in Sarasota, Fla., the base of his old company, and will open a new office for Phoenix Duff & Phelps there. The company also has negotiated long-term employment contracts with the owners and principals of the management firms it has bought.
There will be little significant change in operations for the latest acquisitions, said Mr. Pedersen. Some mutual fund back-office operations may be combined with parent company operations, but there are no firm plans to combine the institutional investment operations of the companies, he said.
The name of the mutual fund families each newly purchased firm runs will change. The Pasadena Funds will become the Phoenix-Engemann Funds. The Seneca Funds become the Phoenix-Seneca Funds and become load-bearing funds, because most of Phoenix Duff & Phelps' mutual fund distribution is through third-party brokers and advisers.