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Money Management

Victory Capital announces AUM up 2.1% for quarter, 7.8% for year

Firm announces deal to acquire USAA Asset Management

Victory Capital Holdings on Tuesday reported $63.6 billion in assets under management as of Sept. 30, up 2.1% from three months earlier and 7.8% higher than a year earlier.

Mutual fund assets totaled $38.2 billion as of the end of the latest quarter, up 1.1% from the end of the previous quarter and up 2.4% from the end of the year-earlier quarter. Exchange-traded funds AUM totaled $3.3 billion, up 13.8% and 74%, respectively.

Assets managed in separate accounts and other vehicles totaled $22.1 billion, up 2.8% from June 30 and 11.6% higher than Sept 30, 2017.

Across all investment vehicles, the firm experienced net outflows of $672 million in the quarter, compared to net outflows of $102 million in the second quarter and net outflows of $778 million in the third quarter of 2017.

Net outflows of $852 million were reported from Victory Capital's mutual funds in the third quarter vs. net outflows of $153 million in the previous quarter and net outflows of $720 million in the year-earlier quarter.

Victory Capital's ETFs had net inflows of $287 million in the three months ended Sept. 30 vs. net inflows of $200 million in the quarter ended June 30 and net inflows of $235 million in the quarter ended Sept. 30, 2017.

Separate accounts/other vehicles had net outflows of $107 million in the quarter ended Sept. 30 vs. net outflows of $149 million in the previous quarter and net outflows of $293 million in the year-earlier quarter.

Victory Capital's revenue was $108 million in the quarter, compared to $104 million the second quarter and $102 million in the year-earlier quarter. Net income was $20.6 million vs. $18.7 million in the previous quarter and $7.9 million in the year-earlier quarter.

Victory Capital became a public company through an initial public offering on Feb. 8.

Separately, Victory announced in the earnings release that it would acquire USAA Asset Management, the mutual fund and ETF business of insurer USAA, for $850 million in a debt-and-cash deal.

The acquisition of USAA Asset, which had $69.2 billion in assets under management as of Sept. 30, would more than double Victory Capital's $63.6 billion overall AUM as of the same date.

USAA Asset would become Victory Capital's 11th investment boutique.

David C. Brown, chairman and CEO of Victory Capital, said in the earnings release that the acquisition would be "a strong diversifier for us with the addition of quality investment teams and products." Mr. Brown said USAA's clients, mainly military personnel and their families," will open "a new distribution channel with a loyal member base."

The USAA deal is expected to close in the second quarter.

The agreement is the second announced by Victory in less than two months. The company announced Sept. 24 that it was acquiring derivatives firm Harvest Volatility Management for $300 million in a deal expected to close in the first quarter of 2019. Harvest manages $12 billion in assets.

Mr. Brown said in the release that the acquisition of USAA Asset and Harvest "demonstrate the value of our differentiated business model."