Phoenix Investment Partners last week agreed to buy money manager Martin Zweig's mutual fund business, a transaction which provides cash for Zweig and new products for Phoenix.
Zweig and Phoenix officials said Wednesday that Phoenix of Hartford, Conn. will pay as much as $164 million in cash for the open and closed-end mutual fund business of the Zweig Group, Zweig's closely-held New York fund advisory firm. Phoenix will pay $135 million at the time of the closing, expected in the first quarter of 1999, and up to $29 million over the next three years if the Zweig Group hits revenue targets.
The Zweig Group's fund business - which includes eight open-end and two closed-end funds - had approximately $4.4 billion in assets under management as of Nov. 30. Phoenix did not buy the hedge funds with which Zweig's firm is affiliated.
Phoenix does not plan to change Zweig's investment process. Current portfolio managers will remain and Zweig will continue to make asset allocation decisions, Phoenix officials said. Phoenix, however, will provide operations support and added distribution capacity for Zweig's funds.
The Zweig purchase is similar to two money management transactions which Phoenix conducted in 1997- the acquisitions of Roger Engemann & Associates and of a majority stake in Seneca Capital Management. After both transactions, Phoenix left the firms independent on the investment side and provided operations and distribution services. Phoenix and its affiliates now have a total of approximately $50 billion in assets under management.
Zweig, an author and newsletter writer, is known for his asset allocation discipline and market-timing techniques. Interest in the funds has hinged on Zweig's following among individual investors, said Bridget Hughes, an analyst at Morningstar. Zweig markets the funds' ability to take a big cash position to reduce market risk. Hughes said the cash cushion has reduced performance compared to peers in recent years.
Performance rankings from Lipper show mixed results for the Zweig funds. For example the Zweig Managed Assets Fund, a flexible fund which invests in a mix of domestic and foreign stocks and bonds, has ranked in the top third of its peer group in the past 12 months, according to Lipper. During the same period, Zweig's large and mid-cap fund, the Zweig Strategy Fund, is down more than four percent while its growth fund peer group has averaged a total return of roughly 16 percent, according to Lipper.
Zweig's funds are sold through intermediaries such as wirehouses, regional broker/dealers and planners. While Phoenix will expand Zweig's distribution potential, Phoenix said that Zweig's sales and marketing group also will strengthen Phoenix's distribution efforts.