SAN DIEGO -- As part of a new focus on institutional management, Nicholas-Applegate has sold its retail mutual fund and defined contribution plan businesses in the U.S. and abroad.
By shedding the retail businesses, the firm is bailing out rather quickly on two recent business expansions and is returning to its core strength -- institutional investment management.
The $1.4 billion domestic retail mutual fund, including about $150 million in bundled 401(k) plan business, was sold to Pilgrim America Capital Corp. for $22.5 million. The deal is subject to shareholder and regulatory approval and is expected to close in four months.
As of Feb. 1, Pilgrim America became the exclusive distributor of the Nicholas-Applegate retail funds. It expects to retain most of the Nicholas-Applegate retail sales force and 401(k) plan program employees.
Nicholas-Applegate will subadvise $1.2 billion of the retail fund assets and will have a financial interest in the funds it will manage.
Pilgrim America will assume management of the Nicholas-Applegate Balanced Growth, High Quality Bond and High Yield Bond Funds. Pilgrim America's existing family of eight retail mutual funds has about $1.8 billion under management.
Nicholas-Applegate has offered mutual funds for some time, but its entrance into the bundled 401(k) world is rather late to make it a viable competitor in the maturing industry. The company mounted an effort to offer quasi-bundled 401(k) plan services in 1997, outsourcing administration to CNA Trust, Sacramento, Calif., and creating a multimanager fund platform.
No critical mass
Art Nicholas, managing partner, said Nicholas-Applegate has yet to aggressively market the product, which has attracted only $150 million from bundled plans.
It became obvious through a strategic review of business operations, he said, that without critical mass, support of both retail mutual fund marketing and the 401(k) program was unlikely to be worth the cost, which was disproportionately higher than that of investment management operations.
Separately, Nicholas-Applegate agreed to sell its Dublin and Singapore-based mutual fund families and its investment management businesses in Hong Kong, Singapore and London to Colonial First State Investments of Australia. Assets under management total about $400 million. Terms of the deal were not available; it is expected to close in 60 to 90 days, and is subject to shareholder and regulatory approval.
Colonial First State will assume management of all assets, although most Nicholas-Applegate personnel in the international offices will transfer along with the funds.
Nicholas-Applegate will continue to manage its $1 billion family of investment-only institutional mutual funds, which clone the strategies of the retail funds it just sold, said Rick Shaughnessy, a spokesman. Nicholas-Applegate also will retain a small bundled 401(k) plan program it offers jointly with Trust Fund Advisors.