Fifth Third Bank dumps mutual funds business in two deals

CINCINNATI, Thu Apr 5, 2012 – Fifth Third Bancorp said on Thursday it would get out of the mutual fund business, selling off most of its assets to two rivals. The Cincinnati bank said it will continue as a sub-adviser on some of the funds.

Bank-branded funds have become less valuable as even in-house brokers and advisers, under pressure from regulators, have been selecting from a wider array of products.

“The object was to continue to use an open-architecture client offering,” said Phil McHugh, who oversees Fifth Third’s investment advisor unit which includes asset management.

Federated Investors Inc., the third-largest manager of U.S. money market funds, will acquire about $5 billion of such assets from Fifth Third and merge them into four of its existing funds, the company said.

Low interest rates and increasing regulation have put a crunch on smaller money market fund managers. Pittsburgh-based Federated has said it is seeking to buy up funds as the industry consolidates.

In a second deal, Cincinnati-based Touchstone Advisors Inc., a unit of Western & Southern Financial Group, said it will acquire the assets of 16 stock and bond mutual funds from Fifth Third. Fifth Third managers will continue to sub-advise certain funds, the companies said.

Last year, Touchstone also acquired fund assets from the U.S. arm of London’s Old Mutual plc. Touchstone said it would oversee $13 billion after the deal is completed. The firm said in October it would oversee $10 billion when the Old Mutual deal closed.

Terms of both deals, which are expected to close in the third quarter, were not disclosed. Neither deal would have a material impact on Fifth Third’s results, the bank said. Fifth Third’s money management unit oversaw $14.6 billion of U.S. equity, international and fixed income assets at the end of 2011.