Federated Investors Unit To Buy a Part of Signature
May 01, 2011
PITTSBURGH -- A subsidiary of Federated Investors signed a letter of intent to acquire the mutual-fund-administration business of Signature Financial Group Inc., which services more than $11 billion in assets. Terms of the acquisition, which is to be formally announced Monday, weren't disclosed. Federated Services Co., the mutual-fund servicing unit of Federated, currently oversees about $90 billion in assets, including many for bank clients, but is facing increasing competition in the business. The biggest client in the Signature portfolio is Bankers Trust Co., which is owned by Bankers Trust New York Corp.. Following the sale, Signature plans to focus on marketing its ``hub-and-spoke'' structure for mutual funds, which has been facing competitive threats from several banks and challenges in overseas marketing. In hub-and-spoke, an investment company manages a pool of assets for various ``spokes,'' banks and other mutual-fund providers that may set varying terms for entry to the pool. Signature, which first patented hub-and-spoke in 1989, has faced a number of setbacks in recent months. A U.S. District Court ruling in April invalidated its patent, clearing the way for rivals to market their own variations on hub-and-spoke. Closely held Signature, based in New York, has said it will appeal the decision. Not long afterward, J.P. Morgan & Co. moved its fund-administration business from Signature to State Street Boston Corp.. State Street is one of several rivals, which also include PNC Bank Corp., that are marketing rival versions of hub-and-spoke. Analysts said Signature also faces challenges in bringing hub-and-spoke to Europe, a major thrust of its current marketing efforts. The transaction was reported in Mutual Fund Market News.
