Mellon Financial Corp. announced a deal Tuesday for a Rhode Island investment firm that is the private wealth management group's third this summer and seventh in four years as part of a national expansion.
Craig R. Sutherland, the private wealth group's national director, said it must continue to enter markets where it currently lacks a presence. The private wealth unit has $75 billion of assets under management and 60 offices, in California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Kentucky, Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, and Washington.
Mellon's agreement to buy the privately held Providence Group Investment Advisory Co. in Providence, R.I., would give it its first Rhode Island office. The deal would add about $750 million of client assets.
"Other markets are becoming fewer and fewer because we have established a presence in the East, the Northeast, the West, and the South, but when we look in the middle of the county there are some attractive regions," Mr. Sutherland said. "Chicago and Texas are high priorities - if we find the right marriage of circumstance - because the demographics are very attractive there."
Mr. Sutherland also said there are attractive "sleeper" regions like Detroit that have been relatively ignored by most private wealth managers.
It is crucial that Mellon proceed cautiously, he said, however. "It is essential that we find the right marriage and the right partnership in a good market," he said. "We cannot just pick a market and then try to figure out how to get in there."
Mellon also wants to continue to develop share in the Northeast, he said, and the Providence deal satisfies both that specific criterion and Mellon's more general criteria. "Rhode Island is an attractive market for us and is underserved when you consider what we can bring to the marketplace," he said.
The company plans to transfer two executives from its Boston private wealth management headquarters to Providence and will expand its employee roster there.
Mellon announced an agreement in August to buy Pareto Partners to develop its alternative investment, currency management, and global fixed-income asset management businesses. It had already owned 30% of Pareto, a London currency manager.
In July, Mellon announced plans to buy Paragon Asset Management Co. in Las Vegas, which would add about $600 million of client assets.
In June, it agreed to buy Evaluation Associates Capital Markets, a Norwalk, Conn., hedge fund manager that offers hedge fund-of-funds and manager-of-manager strategies. It manages $2.7 billion in hedge fund-of-funds strategies and invests in event-driven, relative value, and directional strategies.
Pamela Brewster, a senior analyst at Celent Communications, a Boston financial research firm, said this string of acquisitions by Mellon is part of a consolidation trend in the private wealth management business. Banks are buying to capture revenue from high-net-worth investors, she said.
Celent predicts that high-net-worth customers will help asset managers generate nearly $100 billion of revenue by 2007. But because there are only 2.3 million high-net-worth people, companies are working hard to capture share.
Ms. Brewster said PNC Financial Group Inc. made a deal for Riggs National in July in part because of its private banking and wealth management businesses.
"Private banks are chasing a pretty small segment of customers, and there really isn't enough to go around," she said. "To really service these individuals, asset managers need alternative investments.
They need a full array of products and services. They need to be sophisticated in terms of what they are offering."
"By acquiring more boutiques," she said, "large firms are gathering that expertise."
