Chuck Fawcett, V.P. of alliances at Federated Investors, which has acquired three small fund groups over the past 18 months including the three Rightime Funds with a collective $400 million in assets, hasn't seen an overwhelming number of fund management companies abandoning the mutual fund business.

But those he has seen exiting generally fall into two camps--smaller groups that have great products but are struggling with distribution, or those that are double cursed with product manufacturing and distribution difficulties, he said.

Often, good fund managers, like those at the helm of the Kaufman Fund, which Federated acquired in April, simply want to focus on managing money and don't want to fret over marketing and distributing the fund or running a small company, Fawcett said.

Additionally, companies sometimes choose to focus on only one audience within the investment management industry, Fawcett said. The IAI Fund Group, for example, which Federated acquired last year, opted to focus exclusively on managing institutional money for pension and profit sharing plans, endowments and foundations, and sold its 11 funds, which had been saddled with problems, to Federated.

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