Fund Times: Merrill-BlackRock Rumor Proves True
Plus, New Eaton Vance fund, ABN AMRO fund, and more.
We reported on Feb. 14, 2006, that Merrill Lynch (MER) was in talks with BlackRock (BLK) to exchange its asset management business for a 49% stake in BlackRock, and recent developments indicate that this deal is projected to close in September 2006. This merger will create an industry giant with combined assets under management of about $1 trillion, putting the new firm in the leagues of top asset managers like Fidelity and Capital Group. Merrill's 49.8% stake in the combined firm would be worth about $9.3 billion based on market closing prices Tuesday. This price equates to 1.7% of Merrill's assets under management and about 15.9 times its 2005 pretax earnings, which is in line with the typical range for asset-management deals.
Although it's still too early to know many details, all Merrill retail funds will assume the BlackRock label. That move helps Merrill sidestep the controversy surrounding its previous plan to rebrand its funds under the Princeton name. According to a BlackRock spokesman, fund shareholders shouldn't expect to see a spate of fund mergers. However, given BlackRock's bond-managing prowess, we wouldn't be surprised to see fund mergers on the fixed-income side. Finally, the equity operations will be housed in Boston and in New Jersey.
The head of Merrill's money-management group, Bob Doll, will join BlackRock as their global equity CIO and chairman of the private-client group. BlackRock's Keith Anderson will remain global fixed-income CIO, and BlackRock's Rob Kapito will continue as head of all portfolio management.
After an extended period of outperformance (enjoying double-digit gains for the past three years) and with low yields leaving little room for upward growth, ever-optimistic Eaton Vance is rolling out Eaton Vance Real Estate Fund. The fund will invest at least 80% of its assets in real estate investment trusts (REITs), and may invest up to 20% in foreign stocks. J. Scott Craig, who joined Eaton Vance in 2005, will manage the fund. Craig has more than 12 years of experience researching real estate equities at Northwestern Mutual Life Insurance Company, but this will be his first attempt to manage a public mutual fund. The fund is expected to cost 1.15%, which is less costly than typical specialty category rivals.
New ABN AMRO Target-Retirement Funds
AMB AMRO is joining the growing target-retirement fund field. It has plans for four funds, each with a principal-protection feature and rather odd target dates: ABN AMRO Target Horizon 2011, Target Horizon 2013, Target Horizon 2016, and Target Horizon 2021.
Because this is just a preliminary prospectus, there is no information about fees or who will be guaranteeing the principal. The funds will be managed by four people: Mark den Hollander, Laurens Visser, Sergey Pergamentsev, and Marina Loscheva. These new funds won't add much to the crowded field of target-retirement funds. Their one unique feature-- principal protection--likely costs more than its value to the funds.
Westcore Manager Departs
Jerome R. Powers, coportfolio manager of Westcore Flexible Income (WTLTX) and Westcore Plus Bond (WTIBX) will retire Aug. 1, 2006. Powers has helped run these top-quintile ranked funds for eight years. However, he works closely with the other comanagers, Mark McKissick and William Stafford, so his departure isn't worrisome.
Alliance Analyst Departure
AllianceBernstein Global Research Growth (ABZAX) is losing a top analyst. Gina Griffin, the former head of the consumer sector, is leaving the firm for personal reasons, and Scott McElroy will replace her. This is the third high-profile departure at AllianceBernstein (a large-growth manager and a bond manager departed earlier) in the last few months, and although we are not yet concerned by this trend we are watching it closely for further developments.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.