Merger Could Mean Changes at RiverSource, Columbia Funds
Ameriprise's purchase of Columbia Management will reverberate through both fund lineups.
In a deal that could lead to changes in the Columbia and RiverSource mutual fund lineups, Ameriprise Financial (AMP), owner of the RiverSource funds, on Wednesday said it will buy the long-term asset-management business of Columbia Management from Bank of America (BAC) for around $1 billion in cash.
After the deal, which is expected to close in spring 2010, Ameriprise will have about $400 billion in assets under management, $165 billion of that from Columbia. The combined asset manager will take the Columbia name and will be based mostly in Boston. Ameriprise chief investment officer Ted Truscott will lead the combined company, with Columbia president Michael Jones serving as president of U.S. asset management, and Columbia chief investment officer Colin Moore taking the same title at the new company. Ameriprise's RiverSource brand will still be used for the firm's insurance and annuity products, as well as for some institutional and mutual funds.
This deal is not a shock; it has widely been known that Columbia was on the block as a result of parent Bank of America's troubles, and Ameriprise was one of several possible suitors to be mentioned in recent months. The question is what the deal means for shareholders of RiverSource and Columbia mutual funds. In the press release announcing the deal, Ameriprise said that it expects to generate $130 million to $150 million in annual cost savings. That means there will be layoffs and probably some fund mergers where the two lineups overlap, though Truscott says most of the cost savings will come from merging back-office operations.
Columbia already is the product of several big mergers. As the firm integrated various fund shops earlier in this decade, a certain amount of culture clash and personnel turnover resulted. For the past several years, the Columbia lineup has been fairly stable, and its funds have been performing well under Moore's leadership. This new merger, however, could result in some disruption as the two lineups are integrated. Ameriprise has also made some acquisitions in recent years, most notably Seligman, and recently went through its own round of fund consolidation. The RiverSource funds have not been especially good performers as a group, so if and when mergers do happen, it's likely to result in poorly performing RiverSource funds merging into stronger Columbia funds.
Ameriprise also says it wants to "leverage the strengths of the well-known Columbia Management and Columbia Wanger brands." This makes it sound like Ameriprise could try to bring more assets to Wanger's Acorn funds, including Columbia Acorn (LACAX), whose $14 billion in assets already make it the largest fund in the mid-cap growth category. It's always somewhat worrisome when funds get too big, but Columbia Acorn has continued to be a solid performer despite its size. Columbia did have some issues earlier this decade with letting funds get too big, but now the firm keeps an eye on all its funds to make sure their size isn't adversely affecting performance. That won't change under Ameriprise's ownership, since Columbia's Moore will continue to run the investment side of things for the combined company.
David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.