Mellon Financial Corp. says it is seeking to expand its global position in currency management and build up its alternative investment business through its announced deal to buy the shares of Pareto Partners it does not already own.
Mike Dunn, a spokesman for Mellon, said Friday that the Pittsburgh financial services company intends to bolster, specifically, its global fixed-income capabilities. The deal is expected to close by the end of the quarter, he said. It includes Pareto’s $35 billion currency management business and its $3 billion global fixed-income asset management business.
Mellon already owns 30% of Pareto Partners, a London currency manager, and the purchase agreement announced last week is for the 40% owned by Pareto’s employees and a 30% stake owned by XL Capital Ltd.
The deal was made now because interest in alternative investments, especially hedge funds and currency, has been rising, said Mr. Dunn.
“Pareto’s currency management business is becoming an increasingly integral part of our strategic growth plans,” Ronald P. O’Hanley, a Mellon vice chairman and the president of its institutional asset management business, said in a press release, “and we are looking forward to leveraging Pareto’s intellectual capital and global perspective to create additional innovative strategies for the benefit of our clients.”
Geoff Bobroff, the president of the asset management consulting firm Bobroff Consulting Inc. in East Greenwich, R.I., said that Mellon has focused on its asset management business since selling its retail banking division two years ago. Currency management could be an important component of continued growth in the business, Mr. Bobroff said.
“As we move into a more global marketplace, currency management can be an important ingredient to some customers,” Mr. Bobroff said.
Mr. Dunn declined to comment on potential acquisitions but did say the company has stepped up its purchase activity recently.
Mellon has expanded its alternative investments exposure in recent months with some key deals.
It announced plans last month to buy Las Vegas-based Paragon Asset Management Co., which would add roughly $600 million of client assets. It would be the sixth purchase by Mellon’s private wealth management group in four years.
The parent company bought Seattle-based Safeco Trust Co. this year, and the private wealth management group bought Arden Group in Georgia last year, Weber Fulton & Felman in Ohio two years ago, and Van Deventer & Hoch of California in 2001.
Mellon agreed in June to buy Evaluation Associates Capital Markets, a Norwalk, Conn., hedge fund manager that offers hedge fund-of-funds and manager-of-manager strategies.
The deal with the $4.5 billion asset manager is expected to close during this quarter.
Evaluation Associates manages $2.7 billion in hedge fund-of-fund strategies and invests in event-driven, relative value, and directional strategies.
Its purchase would almost double Mellon’s $3.1 billion of hedge fund assets. The Mellon private wealth management division had $35 billion of assets at June 30.
