In a move industry insiders say indicates that consolidation of the money market fund industry is a sure bet, Federated Investors of Pittsburgh last week announced it was buying $29 billion in money market funds sponsored by Alliance Capital Management of New York. As of Sept. 30, Alliance had $487 billion in assets, while Federated had $178 billion.
The acquisition, under which Federated will acquire 22 money funds carrying the AllianceBernstein banner and sold through broker/dealers, is being structured as a multi-year financial arrangement valued at $128 million. Federated will initially pay Alliance $25 million and make additional payments over the next five years contingent upon future revenue levels. Based upon current rates, these annual payments would collectively total $103 million, the net revenue the funds would have contributed to Alliance's bottom line.