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Fund Times: ICAP Funds and RS Investments Acquired

Plus, news on RS, PIMCO, Putnam, Dreyfus, Oak Value, Artisan, and more.

Morningstar Analysts, 05/22/2006

New York Life Investment Management announced that it is acquiring Institutional Capital Corporation (ICAP), a superb Chicago-based money manager. ICAP's three mutual funds will join New York Life's MainStay fund family, and ICAP will likely subadvise other MainStay funds.

Despite posting stellar track records on funds like ICAP Select Equity ICSLX and ICAP International ICEUX, for which ICAP president and chief portfolio manager Rob Lyon and his team won Morningstar's 2005 International-Stock Manager of the Year award, ICAP's funds are still quite small. The shop's funds, which have roughly $2 billion in assets among them, will now be distributed by New York Life's considerable sales force. ICAP's principals, including Lyon and Jerry Senser, signed employment contracts with New York Life for an unknown length of time.

When the merger is complete, current shareholders in ICAP funds will hold no-load I shares and will continue to pay 0.8%. But new load share classes will be rolled out. New York Life owns other small asset managers, such as MacKay Shields and McMorgan.

In addition to the impressive performance of its funds, ICAP has historically been a shareholder-friendly shop, with all three of its funds earning a Morningstar Stewardship Grade of A. We hope that MainStay will take a "hands-off" approach to this acquisition and will do nothing to compromise these funds' fine record of stewardship. Investors who want access to these funds without paying a sales charge should act with some haste, as the two parties expect the deal to close on or around June 30. Current investors, and those who open accounts before the merger is finalized, should be able to get into the no-load I shares.

Guardian Buys Stake in RS Investments

In another high-profile asset manager sale, Guardian Investor Services, a division of The Guardian Life Insurance Company of America, has agreed to purchase a 65% stake in RS Investments, the San Francisco-based advisor to the RS Funds family.

In a statement filed with the SEC, RS Investments said that the firm does not anticipate that the Guardian acquisition will result in any change in fund management personnel, investment objectives, or policies. However, the CEO of Guardian, Dennis Manning, has also said: "We will use Guardian's extensive distribution platform to expand the breadth and depth of RS's market penetration. The scope and scale of our distribution of RS mutual funds will bring more choices to more customers."

This statement could presage a transition at RS from a no-load to a load-based fund lineup.

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