Fifth Third Bancorp on Thursday announced it sold more than $1.5 billion of affiliate Fifth Third Asset Management-sponsored equity and bond mutual fund assets to Touchstone Advisors and roughly $5 billion in Fifth Third AM money market funds to Federated Investors.
Terms for either deal weren't disclosed.
In a telephone interview, Steven M. Graziano, president of Touchstone, said the expected close in September of his firm's deal with Fifth Third will provide a huge boost for Touchstone's strategy of sponsoring mutual funds subadvised by institutional-quality money managers.
The deal will:
- add two funds with four-star Morningstar ratings — the $52 million Fifth Third Micro Cap Value fund and the $232 million Fifth Third Strategic Income fund — to Touchstone's lineup, which Fifth Third Asset Management will continue to serve as subadviser;
- add scale to existing Touchstone funds launched in 2009, which Mr. Graziano said have solid performance numbers but have yet to reach the $50 million hurdle in assets that big distributors require before marketing those funds on their networks; and
- add another important distributor for Touchstone in Fifth Third Bancorp.
With the Fifth Third deal, and the deal announced in October for Touchstone to acquire $2 billion in mutual fund assets from Old Mutual Asset Management, Touchstone's client assets will climb to more than $13 billion. Mr. Graziano said the OMAM deal should close April 13.
In a separate interview, Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, said the deal with Touchstone will allow Fifth Third Asset Management to focus on his company's strengths, managing money for institutional clients.
Mr. Wirtz said over the past five or six years, the institutionally focused segment of Fifth Third Asset Management's business has enjoyed double-digit growth even as the mutual fund business was treading water. The company's sharpened focus should allow the growth of its institutional business to accelerate, Mr. Wirtz said.
According to data tracker eVestmentAlliance, Fifth Third Asset Management had assets under management of $14.6 billion as of Dec. 31, including $2.1 billion in assets managed for corporate clients, $1.8 billion managed for endowments and foundations, and $1.5 billion of Taft-Hartley money.
Federated's purchase of Fifth Third's money market assets comes even as Federated's president and CEO, J. Christopher Donahue, has warned that regulatory proposals currently under consideration could severely undermine the industry. Meghan McAndrew, a Federated spokeswoman, said her company remains confident that money funds remain a great business to be in.
