San Francisco-based HighMark Capital Management announced a big shift away from the mutual fund business today, as the firm sheds 22 of its funds in a pair of deals. Nationwide Financial picked up 17 of the 24 mutual funds controlled by the Union Bank subsidiary, while New York-based investment management firm Reich & Tang acquired five of HighMark’s money market funds.
HighMark has not completely exited the mutual fund business, however, and the firm will subadvise nine of the funds sold to Nationwide. But the move does signal a shift away from the retail sector for the asset management firm toward its wealth management and separately-managed institutional clients. HighMark President Dennis Mooradian said the transactions allow the registered investment advisor to refine its strategy, particularly with Reich & Tang.
“With cash becoming an increasingly important asset class, particularly over the past five years, we realize the importance of partnering with a specialist whose infrastructure for sweep programs will undoubtedly ensure that our shareholders experience a seamless transition,” Mooradian said in a statement Wednesday.
The terms of HighMark's deal with Nationwide were not disclosed, although Nationwide estimated it will add $3.6 billion in new assets to its platform. Highmark will continue to interact with its former equity and bond mutual funds, Nationwide says, as a subadvisor. Current outside sub-advisors including Bailard and Geneva Capital, are expected to remain in place.The deal is expected to close at the end of the third quarter, pending regulatory and shareholder approval.
“Through this transaction, Nationwide continues to expand the breadth and depth of its product portfolio to provide financial advisors with as many solid, long-term investment options as possible,” said Michael Spangler, president of Nationwide Funds. “We look forward to working with HighMark to expand the distribution of these funds and provide current shareholders with immediate benefits.”
In addition to dropping a majority of its mutual funds, HighMark sold its five money market funds—with an estimated worth of over $4 billion in shareholder assets—to Reich & Tang.
The deal allows Reich & Tang to provide additional services to meet its clients’ liquidity and cash management needs, said the firm’s CEO Michael Lydon. “The similarity in both firms’ business structures creates an ideal pairing for a seamless acquisition, which will provide HighMark Fund shareholders with immediate cost benefits and integration into a highly stable, diversified client base,” he said.