Pioneer Group of Boston has hired Salomon Smith Barney, a unit of Citigroup and Merrill Lynch, both of New York, as investment bankers to help the firm consider its "strategic alternatives." Those alternatives could include a sale of the firm.

According to a Feb. 11 statement the firm released along with its 1999 fourth quarter financial results, Pioneer has hired the two investment bankers to conduct a financial analysis of the company's lines of business. Both investment banks will then assist the Pioneer board and company executives in evaluating strategic alternatives, the company said in a statement.

A Pioneer spokesperson declined to comment on the scope of possible alternatives or address speculation that the firm might be up for sale or might sell off some of its business units. The spokesperson, Anne Patenaude, did say that during the fourth quarter of 1999, Pioneer Group showed a profit. It suffered losses in 1998.

"We are executing against our plan to return the company to profitability," said Patenaude.

Although the Pioneer board recommended that the firm consider alternatives, at least two of Pioneer's institutional investors, Southeastern Asset Management of Memphis, Tenn. and Lens Investment Management of Portland, Maine, are still pressuring Pioneer to increase shareholder value.

Southeast, the adviser to four mutual funds under the Longleaf Partners Funds name, owns a 17 percent stake in Pioneer allocated among three of its mutual funds. Southeast declined to comment for this story.

Lens, which manages $400 million, owns approximately 4.1 percent of Pioneer's stock for a variety of non-mutual fund clients. The announced remedies are "superficial and disappointing," said Rick Bennett, head of governance at Lens, in a statement. Lens is expecting to take stronger actions and "press Pioneer to take more aggressive steps to increase shareholder value," said Bennett.

Over the past several years, Pioneer has had disappointing results in various international investments. These include a failed gold mining operation in Ghana which is being closed, a failed timber operation in Russia and a failed Russian bank.

Pioneer's international financial services business, which consists of investment management operations in Russia, Poland and the Czech Republic, posted a $1 million loss in the last quarter of 1999. Pioneer was the first U.S. entrant into the pension fund market in Poland, but the company found that operating international offices was costly, said industry analysts.

"Pioneer was saddled with losing operations in Eastern Europe," said Burton Greenwald, fund consultant and principal of B.J. Greenwald Associates in Philadelphia.

Pioneer Group is the parent company of Pioneer Investment Management, the mutual fund advisory unit which currently advises 25 open-end fund, one closed-end fund formerly owned and advised by Mutual of Omaha of Omaha, Neb. and a number of offshore funds. Current assets under management in the open-end Pioneer funds are $21.5 billion. Overall, Pioneer manages $23.6 billion, about $2 billion of which is managed for private accounts, variable annuity sub-accounts and the firm's offshore mutual funds.

The asset management unit, formerly known as Pioneering Management Corp., was broken out as a separate strategic business unit and renamed in September 1998. Since then, Pioneer has been trying to broaden its largely equity fund complex.

Pioneer's fund lineup includes domestic equity funds as well as several international funds. Its international funds include an uncharacteristically aggressive emerging market fund that has done very well, said William Rocco, an analyst with Morningstar, the fund data firm in Chicago. Other than that fund, the Pioneer international fund lineup is "uneventful," he said.

But, at the end of 1997, the Pioneer Europe Fund stopped investing in small to mid-sized European companies and turned to large cap investing, said Hap Bryant, an analyst with Morningstar. Once that happened, the fund lost its distinction and began looking like other European equity funds, he said.

Pioneer is better known among intermediaries as a conservative domestic equity firm, said industry analysts. But the fund group's devotion to its value investment strategy amid markets that have been rewarding growth investors over the past few years has spelled trouble.

"On the domestic side, most of their funds have been suffering," said Morningstar analyst Kelli Stebel. "Value funds have taken it on the chin over the past few years." Still she pointed to the Pioneer Microcap Fund, which was introduced in early 1997, as having notable performance.

According to Pioneer, sales of the company's U.S. registered mutual funds were approximately $850 million in the fourth quarter of last year. That is seven percent lower than asset inflows a year earlier. The investment advisory unit had net redemptions of $240 million last year, Pioneer announced.

To fill voids in its fund offerings, Pioneer, in August, entered the high yield fixed-income market with its purchase of the then $8 million Third Avenue High Yield Fund from EQSF Advisers in New York. Then, in November, Pioneer introduced its Tax-Managed Fund. The firm also said it will be concentrating efforts on developing new business in the retirement plan segment of the market with variable annuity and defined contribution products.

Pioneer has also made some personnel changes. Last month Steve Graziano, former director of marketing, was promoted to head up the group's domestic distribution and oversee marketing and sales efforts. In his place, Pioneer hired William J. Poulin, formerly vice president of investment banking at Putnam, Lovell, De Guardiola & Thornton of San Francisco, as the firm's new senior director of marketing. Poulin is responsible for product development and the strategic planning and marketing initiatives of the investment management unit.

Last week, Pioneer hired Iang Jeon as the firm's senior managing director of e-commerce to spearhead Pioneer's Internet initiatives. Jeon previously was in charge of e-commerce at Fidelity Investments and Liberty Financial, both of Boston, and at Scudder Kemper Investments of New York.

Despite all these moves, it may be too late to save Pioneer, said industry analysts.

"They obviously have lost momentum in their core business," said Greenwald. "They don't have the resources to compete with Putnam, Franklin and MFS. It's a fire sale." Banks or insurance companies or even second-tier investment management companies would be likely candidates to buy Pioneer, he said.

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