Aberdeen buys asset-manager operation

A Center City investment firm, the U.S. arm of a Scottish money manager, is boosting its presence in the Philadelphia area by purchasing a West Conshohocken asset-management business.

Under the deal, announced yesterday, Aberdeen Asset Management Inc. will buy the business from Nationwide Financial Services Inc. for an undisclosed amount. A long-term goal for Aberdeen is to use the acquired operation to expand into mutual fund management and distribution.

When the deal closes Oct. 1, Aberdeen will run 21 Nationwide Mutual Funds and nine Nationwide Variable Insurance Trust Funds with about $7 billion under management on Aug. 31.

"We've acquired . . . a very strong and capable U.S. equity-investment team," said Gary W. Bartlett, chief executive officer of Aberdeen's U.S. operations, which are headquartered on Market Street.

Nationwide will retain ownership of the funds, but Aberdeen will now manage them.

The deal includes about 50 portfolio managers, analysts and support personnel, who will continue working in offices at Four Tower Bridge in West Conshohocken.

Bartlett said eight to 10 Aberdeen U.S. equity managers, who manage about $1.5 billion of Aberdeen's $37.5 billion in U.S. assets, would join their new colleagues in the Nationwide offices.

Aberdeen's main Philadelphia business is the former Deutsche Asset Management fixed-income, or bond, operation. Aberdeen Asset Management P.L.C., which has $178.8 billion under management, bought the Deutsche operation in December 2005. Since then, employment at the institutional money manager has jumped from 40 to 110 in April and 135 now, according to Bartlett.

Adding Nationwide's U.S. stock pickers, whose strategies will not change under Aberdeen, helps fill a hole at Aberdeen, which did not have U.S. equity management until recently. The purchase also brings a sales force that could help Aberdeen sell its own mutual funds.

In May, Aberdeen launched Aberdeen Emerging Markets Fund for institutional investors, but not for retail customers. "One of the things we're lacking is the sales force into those retail channels," Bartlett said.

More funds are to come, he said. This month, Aberdeen said it had hired Vincent Esposito from Scudder Mutual Funds Inc. to run its U.S. mutual funds.

Breaking into the U.S. market is difficult for any investment manager, said Burton J. Greenwald, a Philadelphia-based mutual fund consultant. In Aberdeen's case, "they have small name recognition in a very crowded field. They've got a lot of work to be done before they can successfully distribute," he said.

For Nationwide, the deal ends a foray into mutual fund investment management that began in 1999, when Philadelphia native and highly regarded fund executive Paul J. Hondros teamed up with the Columbus, Ohio, insurance company to start Villanova Capital Management.

The next year, Nationwide merged Villanova with Gartmore Investment Management P.L.C., creating a company with $90 billion in assets under the Gartmore name.

But Nationwide soured on the investment-management business and began dismantling Gartmore last year. Hondros departed in December.

What remains is Nationwide Funds Group, which is based on River Road in Whitemarsh Township. The company's strategy is to handle marketing and distribution of its mutual funds, but to hire outside managers to pick investments.

"Now no fund will be managed on a day-to-day basis by an employee of our company," said John H. Grady, president and chief executive officer of Nationwide Funds.

Grady, a former Turner Investment Partners Inc. executive, said he was pleased with the Aberdeen deal. "We wanted these teams to stay intact. We wanted to be able to hire them intact," he said.

Under the deal, 42 employees and $7 billion in assets will transfer to Aberdeen from Nationwide. Figures below are before the deal.

Aberdeen Asset

Management Inc.

Headquarters: Philadelphia.

Chief executive: Gary W. Bartlett.

Assets: $37.5 billion.

Employees: 135.

Parent company: Aberdeen Asset Management P.L.C.

Nationwide Funds Group

Headquarters: Whitemarsh Township.

Chief executive: John H. Grady.

Number of funds: 99.

Assets: $43.7 billion.

Employees: 127.

Parent company: Nationwide Financial Services Inc.

SOURCE: Companies listed

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