PITTSBURGH — Federated Investors Inc.'s purchase of quantitative investment shop MDT Advisors will help the firm meet a long-standing goal of balancing its money market-heavy business with more equity assets, market watchers say.
"It's not a transformational, bet-the-ranch type deal, but if the recent strong asset growth MDT has been enjoying continues, it should clearly help accelerate the growth of their equity business," said Robert Lee, a New York-based analyst with Keefe, Bruyette & Woods.
On May 12, Federated announced it will buy MDT Advisors, a Cambridge, Mass., quantitative equity manager with $7.1 billion in mostly high-net-worth money, for $240 million. According to Atlanta-based eVestment Alliance, MDT had $1.1 billion in institutional money at the end of 2005, with total assets of $5 billion.
The announcement came just as weak first-quarter results had left analysts decidedly bearish about the earnings outlook underpinning Federated's New York Stock Exchange-listed shares.
Between April 28 — when the firm's reported net earnings of 41 cents a share for that quarter came in roughly 10% below the market consensus — and May 11, Federated's share price tumbled 14%, while the broad Standard & Poor's 500 index slipped a mere 0.3%.