American International Group said Tuesday that it has agreed to buy a majority stake in a Dallas asset management boutique.
John McStay Investment Counsel has $4 billion of assets under management, including $700 million in its Brazos mutual fund family. AIG would distribute the funds through its SunAmerica unit.
McStay's investment specialty, small- and mid-cap growth equities and real estate securities, complements the funds offered by SunAmerica, the companies said. AIG, the international insurance company based in New York, bought Los Angeles-based SunAmerica in an $18 billion deal last year.
Terms of the McStay deal, which is expected to close in June, were not disclosed.
Analysts said the deal seems sound.
"It gives them the potential to add some revenues without adding too much cost," said John Roberts, an analyst at J.J.B. Hilliard, W.L. Lyons in Louisville, Ky. "It may be significant in that they're able to push these products through their existing sales network."
That network consists of about 10,000 registered representatives employed by SunAmerica.
McStay would continue to handle marketing for its institutional business of which its clients include endowments, universities, foundations, public funds, and pension plans.
It may end up managing assets for AIG, a SunAmerica spokesman said. And AIG may eventually look for opportunities to market the McStay products overseas, he said. AIG, which sells insurance in 130 countries and jurisdictions, had 1998 revenues of $33.3 billion.
In a prepared statement, AIG chairman Maurice Greenberg said the McStay deal serves a priority for the company: broadening its global asset management business.
With its purchase of SunAmerica last year, AIG broadened its product line, which had consisted mostly of life and property/casualty insurance, to include variable annuities, a popular and fast-growing retirement product.
In its 1997 annual report, SunAmerica said its SunAmerica Asset Management Corp. managed $2.5 billion of mutual fund assets. SunAmerica has 21 mutual funds in its SunAmerica and Style Select families.