Nicholas-Applegate Capital Management has sold off its international and U.S. retail fund businesses as part of an effort to concentrate on institutional and high net-worth clients.
Last week, the firm, based in San Diego with more than $30 billion in assets under management, said it had agreed to sell its international mutual fund business with offices in Dublin, London and Asia to Colonial First State Investments of Melbourne, Australia. Colonial said it will pay $15.8 million.
And on Jan. 29, Nicholas-Applegate announced an agreement to sell 11 U.S. retail funds to Pilgrim America Capital Corp., the small mutual fund company based in Phoenix. Pilgrim America said it would pay $22.5 million for the business.
"We have decided to concentrate our considerable resources in areas where we have core competencies and critical mass," Art Nicholas, managing partner at Nicholas-Applegate, said in a statement last Tuesday.
The deal will enable Pilgrim America to increase and diversify its mutual fund offerings in the U.S. The company plans to offer ten of the funds it is acquiring from Nicholas-Applegate with a sales charge through Pilgrim's distribution network, said James R. Reis, chief financial officer for Pilgrim, last week. That group primarily consists of regional broker/dealers and financial planners, he said. Another fund, the Nicholas-Applegate High Yield Bond fund, will be merged into the Pilgrim High Yield fund. Fund shareholders must approve the changes.
The Nicholas-Applegate funds -- which are largely stock funds and have about $1.4 billion in assets -- will complement Pilgrim's seven open-end and one closed-end funds, Reis said. He also said Pilgrim American is considering offering other new funds but declined to elaborate.
Pilgrim America, with about $5.6 billion in assets under management, is known for its fixed-income products. The Nicholas-Applegate funds primarily are a mix of domestic and international small and mid-capitalization offerings.
The transaction allows Pilgrim to offer "a range of growth, value, international and fixed-income investment products ...," said Robert W. Stallings, president and ceo of Pilgrim America, in a statement.
The transaction is expected to close in four to five months, Reis said. The sale to Colonial will close in two to three months.
Nicholas-Applegate will continue its high net-worth and institutional money management business, said Rick Shaughnessy, a spokesperson for Nicholas Applegate. But the firm will not be leaving the retail fund business entirely as it plans to sub-advise eight of the funds it is selling to Pilgrim America.
Although the formula varies from fund to fund, Pilgrim America and Nicholas-Applegate will, in the aggregate, divide the investment management fee equally on the funds which Nicholas-Applegate sub-advises, Reis said. Nicholas-Applegate will receive a payment roughly equal to two years of management fees if it is dropped as sub-adviser, Reis said.
The transaction "really enables each of us to do what we do best," Shaughnessy said.