Invesco Proposes 57 Fund Mergers

This week  Invesco (IVZ) proposed 57 mutual fund mergers related to its acquisition of  Morgan Stanley's (MS) Van Kampen retail fund business.

The move affects roughly 37% of Invesco's funds and 21% of its mutual fund assets.

Almost half of the mergers involve the firm's domestic-equity fund lineup.

Even before the mergers, four of Invesco's five largest funds are former Van Kampen funds. Its three largest funds will get even bigger as Invesco merges multiple funds into them.

Invesco will merge away three funds with more than $1 billion in assets: The $1.2 billion  Invesco Basic Value  will merge into Invesco Van Kampen (IVK) Value Opportunities (VVOAX). Invesco Large Cap Growth  and  IVK Capital Growth  will merge into the $260 million  IVK American Franchise (VAFAX). American Franchise garners a 5-star Morningstar Rating while Large Cap Growth and Capital Growth are both rated 3 stars.

Invesco says it won't lay off any investment professionals as part of the mergers, because all of the personnel changes happened months ago.

This move follows Invesco's decision to liquidate multiple funds a few weeks ago and is the $113-billion-in-assets firm's biggest step yet to consolidate its 190-fund lineup. The company expects the mergers to take place in the second quarter of 2011.

According to Invesco's calculations, fund shareholders stand to save approximately $78 million over the next two years through fee reductions, contractual expense limitations, and certain one-time cost savings.

Largest Funds

  Fund Size
($ Bil) Category Morningstar Rating Overall Invesco Van Kampen Equity and Inc (ACEIX) 11.4 US OE Moderate Allocation 3 Invesco Van Kampen Comstock (ACSTX) 8.2 US OE Large Value 3 Invesco Van Kampen Growth and Inc (ACGIX) 6.7 US OE Large Value 3 Invesco Van Kampen High Yld Muni (ACTHX) 6.0 US OE Hi Yld Muni 4 Invesco Charter (CHTRX) 5.3 US OE Large Blend 3

 

Largest Funds Merging Away

  Fund Size ($ Bil) Category Morningstar Rating Overall Invesco Van Kampen Capital Gr  3.7 US OE Large Growth 3 Invesco Basic Value  1.2 US OE Large Blend 1 Invesco Large Cap Growth  1.3 US OE Large Growth 3

 

Victory Goes Passive After Core Bond Manager Leaves
Victory Capital Management, the subadvisor on  KeyCorp's (KEY) Victory mutual fund lineup, is exiting the active core and intermediate fixed-income business. Craig Ruch, the head of fixed income, is leaving the firm.

Ruch was a named manager at three funds that will be impacted by his exit--Victory Balanced (SBALX), Victory Core Bond , and Victory Fund for Income (IPFIX). Core Bond and the fixed-income sleeve of Balanced will now be passively managed (Balance's equity sleeve will still be actively run). Core Bond and Balanced account for $149 million and $100 million in assets, respectively, and had uninspiring track records. The remaining fixed-income team members will report to Greg River, Victory's head of investments. Fund for Income will now be solely managed by Heidi Adelman.

In other Victory news, Sean Roche is no longer a portfolio manager for Victory National Municipal Bond  and Victory Ohio Municipal Bond . Paul Toft is now the funds' only manager.

Etc.
Delaware Macquarie Real Estate Portfolio  has terminated its subadvisory agreement with Macquarie Capital Investment Management. Delaware Management Company assumed management of the portfolio. Delaware Management Company also has reassumed management of Delaware Macquarie Global Real Estate  from Macquarie Capital Investment Management.

The board of directors of the Leuthold Undervalued & Unloved Fund  liquidated the fund Nov. 9, 2010.

The shareholders of Lord Abbett Connecticut Tax-Free Income  , Lord Abbett Georgia Tax-Free Income  , Lord Abbett Hawaii Tax-Free Income  , Lord Abbett Missouri Tax-Free Income  , and Lord Abbett Pennsylvania Tax-Free Income   approved the reorganization of the funds into  Lord Abbett National Tax-Free Income  (LANSX). The reorganization is scheduled to be completed Nov. 19, 2010.

The board of trustees of Legg Mason Lifestyle Allocation 100%  approved a reorganization of the fund into Legg Mason Lifestyle Allocation 85% (SCHAX) in April 2011. The board also agreed to reorganize  Legg Mason ClearBridge Capital  into Legg Mason ClearBridge Mid Cap Core (SBMAX), and  Legg Mason ClearBridge Dividend Strategy  into  Legg Mason ClearBridge Equity Income Builder (SOPAX), subject to shareholder approval.

 Legg Mason ClearBridge Fundamental All Cap Value (SHFVX) has changed its performance benchmark from the Russell 3000 Index to the Russell 3000 Value Index.

The board of trustees of Green Century Funds approved a subadvisory agreement with Green Century Capital Management and Northern Trust Investments. Effective Nov. 29, 2010, Northern Trust will replace Mellon Capital Management as day-to-day manager of Green Century Equity (GCEQX) under the supervision of Green Century Capital.

The board of directors of Hartford Income  approved changing the name of the fund to Hartford Corporate Opportunities Dec. 10, 2010. The fund's benchmark will change from Barclays Capital Aggregate Bond Index to Barclays Capital US Corporate Index, and the fund will be allowed to invest as much as 35% of assets in bank loan investments. Additionally, effective Dec. 10, 2010, William Davison and Chris Zippieri will no longer be part of the portfolio-management team. The fund will then be managed by existing manager Michael Gray, as well as new managers Ira Edelblum and Jim Serhant.

The board of directors of Hartford High Yield Municipal Bond (HHMAX) approved changing the fund's name to Hartford Municipal Opportunities.

David Troiano is no longer a portfolio manager for Federated MDT Stock (FMSTX).

Michael Chren is now portfolio manager for Fidelity Blue Chip Value (FBCVX), replacing Charles Hebard.

Matthews Asia Small Companies (MSMLX) will close to new investors on market close Nov. 12, 2010.

The board of trustees of ING Institutional Prime Money Market approved a proposal to liquidate the fund on or about Dec. 20, 2010.

The board of trustees of ING International Value Choice  approved a revision of subadvisory fees, an additional expense waiver arrangement, and a waiver to the management fee paid by the fund. The A shares of the fund are currently contractually limited to an expense ratio of 1.70% through at least March 1, 2011. ING is now contractually obligated to limit the expense ratio to 1.60%, as well as waive 0.10% of the management fee, through March 1, 2012. Both fee reductions will only continue past March 1, 2012, if ING elects to renew them.

Mutual fund analysts Ryan Leggio, Rob Wherry, and Kailin Liu contributed to this report.