Bear Market Prompts USAA to Import Fund Advisors

June 27, 2002 ( - USAA, announced it is farming out its slumping stock funds to outside money managers.

Texas-based USAA, the insurance and financial services company that caters to US military personnel and their dependents, said in a press release eight managers now will oversee about $7 billion in assets held in 19 funds.

The decision, which came after a broad review by executives at USAA’s investment management division, affects nearly half of the 39 mutual funds the company offers (see USAA Looking for Equity Management Exit: Report ).

The sub-advisory arrangements affect 12 retail equity funds, portions of three retail asset allocation funds, and four funds offered through variable insurance products sponsored by USAA Life Insurance Company

Investment managers tapped  to sub-advise USAA funds are:

  • Batterymarch Financial Management, Inc.
  • The Boston Company Asset Management, LLC
  • Dresdner RCM Global Investors, LLC
  • Eagle Asset Management, Inc.
  • Marsico Capital Management, LLC
  • MFS Investment Management
  • Wellington Management Company, LLP
  • Westwood Management Corporation

The move will result in the loss of about 40 jobs, a USAA spokesman said.

“While performance was good in our equity department, it was not great,” said the spokesman, Tom Honeycutt. “It was a necessary decision in order to meet our obligation to shareholders.”

The move underscores the difficult stock market conditions over the last two years that have battered financial companies and made successful stock picking teams hard to come by.

Companies offering mutual funds increasingly are farming out their portfolios to outside firms with strong reputations in an effort to stimulate sales and returns. It also is often cheaper to have someone else run the funds.