Federated May Buy Kaufmann Fund

October 20, 2000 (PLANSPONSOR.com) - When it rains, it pours. Another fund may find itself under new management, as Federated Investors is in "advanced talks" to acquire Kaufmann Fund Inc., an aggressive-growth stock fund, for at least $200 million, according to The Wall Street Journal, citing people close to the situation.

However, the Journal cautions that the talks could still fall apart.

The rumors are the latest in a series of money manager acquisitions. In just the past week, Allianz AG agreed to buy U.S. stock-fund manager Nicholas-Applegate Capital, ABN Amro struck a deal to acquire Alleghany Asset Management, Neuberger Berman opted to pick up the Fasciano Fund and Amvescap PLC, which controls US fund families AIM and Invesco, yesterday announced its acquisition of UK fund manager Perpetual PLC.

According to the Journal, Federated’s initial payment for Kaufmann would equal about 5% of the fund’s assets, on the high end of recent deals.  However, the purchase price reportedly could rise even more if the fund grows strongly over the next five years.

The Kaufmann Fund was launched in 1986 and beat its peers every year from 1988 to 1996, according to the article.  But the fund was a victim of its own success, growing too large to maintain its focus, which led to a gradual style “shift”, and a decline in performance. The fund has dropped to about $4 billion from $6 billion.

Federated is still largely a money-market-fund manager, with some $87 billion of its $130 billion in assets under management in those funds.  But the Pittsburgh-based firm has built a profitable line of stock and bond funds.