Magazine article American Banker

Study Finds 1 in 9 Mutual Funds Now Managed by a Subadviser

Magazine article American Banker

Study Finds 1 in 9 Mutual Funds Now Managed by a Subadviser

Article excerpt

Mutual fund companies are increasingly turning to subadvisers to manage some of their portfolios, according to a study done last year but not yet published by Financial Research Corp. The study, to be released May 26, found that nearly one in nine funds is managed by a subadviser. These funds hold 9.1% of the assets under management in long-term mutual funds and get 20.3% of net new asset flow -- or sales less redemptions and exchanges. That is up from 6.2% of assets under management and 7.5% of net asset flow in 1991. Several banking companies are among the top subadvisers. Deutsche Asset Management, a New York-based unit of Deutsche Bank AG, ranks second among subadvisers, with $36.7 billion of subadvised assets under management, according to the research firm. Mellon Financial Corp. of Pittsburgh ranks sixth with $12.9 billion. That does not include $2.1 billion of assets subadvised by Denver, Colo.-based Founders Asset Management LLC, which Mellon owns. Wellington Management LLP of Boston, which subadvises on $100.3 billion of assets, ranked first. The trend results from supply and demand, said Raymond Liberatore, an associate research director at the Boston-based consulting firm. "Several institutional money managers have strong internal investment capability, but don't want to create a mutual fund and service it," Mr. Liberatore said. At the same time, competitive pressures are forcing fund families to offer more complex portfolios, such as international funds. In such cases, it is usually less expensive to contract for fund management than to hire an investment manager, he said. …

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