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Fifth Third Exits Retail Fund Business

Meridian shores up its ranks and more. 

Morningstar Fund Analysts, 04/12/2012

Fifth Third Bancorp FITB is exiting the retail mutual fund business in order to focus on institutional money management. Over the last few weeks Fifth Third Asset Management, a division of the Cincinnati-based bank, has announced two deals that will send its mutual funds and money market funds to Touchstone Investments and Federated, respectively. Fifth Third had almost $8 billion in these funds. Terms of the deals weren't disclosed.

Touchstone will acquire 16 funds from Fifth Third and merge most of them into the firm's existing lineup. Touchstone, which uses subadvisors on its funds, will in turn hire Fifth Third's management teams to run some of those funds. Another four funds--Fifth Third Dividend Growth FSPIX, Fifth Third Equity Index KNIEX, Fifth Third Small Cap Growth KNEEX, and Fifth Third Structured Large Cap Plus KNVEX--will be liquidated. Shareholders in those offerings will have the opportunity to move into Fifth Third funds before the deal closes. Touchstone has used acquisitions like this one to grow its asset base. Old Mutual shareholders recently signed off on Touchstone's acquisition of 17 Old Mutual funds. Touchstone now has around $13 billion in assets under management. 

Federated FII will swallow up four of Fifth Third's money market funds that hold around $5 billion in assets. Federated is one of the largest players in the money market space with $285 billion in assets in these types of funds. The Fifth Third money market funds will be merged into existing Federated offerings that have similar mandates.

GuideStone Fires Tradewinds as Subadvisor
After a tumultuous month for Tradewinds Global Investors, the GuideStone Funds removed Tradewinds as a subadvisor on GuideStone Funds International Equity GIEYX. The fund has 10 other subadvisors managing its assets, and they remain in place. In March 2012, David Iben, Tradewinds' president and chief investment officer, announced that he would leave the firm at the end of June and would be taking three analysts with him. Iben played a critical role in building the firm and overseeing its investment process, so his departure is a major loss. GuideStone had hired as subadvisors two Tradewinds managers, Emily Alejos and Michael Hart, in March 2011 to manage a portion of the fund’s assets. While Alejos and Hart remain at Tradewinds, there are broader concerns about the firm's stability following Iben's announcement. By the end of March 2012, two of the firm's largest funds, Negative-rated Nuveen Tradewinds Value Opportunities NVOAX and Negative-rated Nuveen Tradewinds Global All-Cap NWGAX, had each lost roughly one fourth of their assets to investor redemptions.

Meridian Rehires Former Staffer 
Aster Investment Management, the advisor for the Meridian Funds, announced it rehired Kevin O'Boyle to help fill the void left by the death of firm founder, Richard Aster. O'Boyle, who previously ran Meridian Value MVALX for almost nine years before leaving in 2004 to start his own shop, will not be a named manager on any of the three Meridian funds. Instead, he will serve in a broader research capacity, especially on Meridian Growth MERDX, which was Aster's main fund before his passing. While the move does shore up the firm's ranks, it doesn't completely answer some of the questions about the future of Meridian Growth since O'Boyle's position isn't permanent (at least not yet) and his past experience was on Meridian Value.

Manager Changes at Chase Growth 
Chase Investment Counsel, the Charlottesville, Va.-based advisor for Bronze-rated Chase Growth CHASX, announced that Peter Wood, a longtime analyst at the firm and recently a named manager on the fund, will retire at the end of April 2012. The firm also announced it has ended a six-month long search for a new chief investment officer with the hiring of Edward Painvin. Painvin previously worked at Allianz-RCM on several of the firm's large cap growth strategies. In addition to his broad firmwide and fund manager roles, Painvin will also help with covering technology companies, a sector that Wood was responsible for before his retirement. 

Morningstar fund analysts cover more than 1,700 mutual funds and write regular commentary covering fund industry news, fund investing trends, picks, portfolio planning, international investing, and more.
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