Goldman Sachs Group LP agreed to acquire Commodities Corp. from Stockton Holdings Ltd.
The deal is the step in Goldman's effort to expand its asset management business.
Though terms weren't disclosed, people at Goldman familiar with the transaction said the firm is paying about $100 million in cash for the Princeton, N.J.-based money manager, which invests in commodities and financial futures.
Commodities Corp., which has about $1.8 billion under management, "expands our investment expertise dramatically," said John McNulty, co- chief executive officer of Goldman's asset management unit.
The purchase would boost Goldman's assets under management to about $110 billion, evenly divided between stocks, bonds, and money market securities.
Goldman, the biggest U.S. investment banking partnership, and other securities firms are anxious to expand in asset management because it provides steady fees that offset volatile earnings from stock and bond trading.
The Commodities acquisition would be Goldman's third of a fund management company in less than a year. In January it completed its acquisition of Liberty Investment Management Inc. of Tampa for about $60 million, and last October it bought CIN Management, the pension fund management arm of British Coal, for about $70 million.
These acquisitions, along with internal growth, have doubled the size of Goldman's asset management business in the past year. Still, the firm is playing catch-up with rivals Merrill Lynch & Co. and Morgan Stanley Group. Inc.
Merrill has $247 billion of assets under management. Morgan Stanley's proposed $10 billion merger with Dean Witter, Discover & Co., announced in February, was driven partly by fund management considerations. The combined assets under management of the merged companies will be about $270 billion, more than any other securities firm.
Goldman will remain on the lookout for more money managers to buy.
"We'll look for firms that have expertise that we don't have," said Mr. McNulty, though the firm isn't in talks with any targets at the moment.
As part of the acquisition, Goldman would manage the commodities investments of Stockton Holdings, a Bermuda-based reinsurance company, for a fee. It would also make a minority equity investment in Stockton of about $25 million, according to people familiar with the situation.
Stockton's biggest shareholder is Orix Corp., Japan's largest leasing company.
Commodities Corp. was founded in 1969 by a group of economists and investors, including Nobel Prize winner Paul Samuelson. It invests in a wide range of commodities, including metals, agricultural products, and interest rate futures, and was the training ground for such prominent commodity traders as Paul Tudor Jones and Bruce Kovner.
The firm has two funds, one of which invests the money of wealthy individuals and institutions in Japan and Europe, while the other manages U.S. investors' assets.
The fund for Japanese and European investors returned an average of more than 20% a year over the past 10 years, Mr. McNulty said, while the other has gained "a couple of percentage points less."
The Standard & Poor's 500 index returned 13.3% a year over the same period.
