ReliaStar Financial Corp.'s planned acquisition of the asset manager Pilgrim Capital Corp. may not be its last deal for an investment company, the insurer's chairman said.

Pilgrim, a $7.6 billion-asset fund company, would be merged into Northstar Investment Management Corp., ReliaStar's $4.4 billion-asset fund unit, to help achieve scale, said John G. Turner, the chairman and chief executive of Minneapolis-based ReliaStar.

"We recognized that we needed more critical mass," Mr. Turner said. But he also suggested that his company is looking to continue to bulk up: "I won't say we won't make more fund acquisitions."

The $258 million deal for Phoenix-based Pilgrim was announced last week and is expected to close in the fourth quarter.

Fund companies need to be large for a host of competitive reasons. Companies with more assets under management gain economies of scale that let them charge lower fees.

Having a bigger asset base generates more revenue, which can be used for bigger compensation packages to attract talented portfolio managers.

And by consolidating operations at Pilgrim's Phoenix headquarters, ReliaStar expects the companies to reduce operating costs by 15% to 20%.

The companies' distribution systems complement each other, Mr. Turner said.

Most of Northstar's sales are through wire houses, and Pilgrim's funds are sold primarily through regional brokerages and financial planners.

Northstar sells through 435 broker-dealers; the combined company would have 860 broker-dealers.

The companies' product lines fit well too, Mr. Turner said. Northstar's best-performing equity funds are its small- and mid-cap growth funds, and Pilgrim is known for its strong large- and medium-large-cap fund, as well as a fund that invests in financial institutions.

But the merger of the Northstar and Pilgrim funds and structured finance products may not create a company big enough to be noticed at a time when top fund companies each manage more than $100 billion.

"They still haven't hit many people's radar," said Jonathan Moreland, director of research at InsiderTrader.com, "but this will help." InsiderTrader is an on-line distributor of insider data and research.

For a smaller company, "it's tough to catch the attention of investors to get the dollars in," Mr. Moreland said, "and in the end that's what the money management business is."

The combined mutual fund company would have 32 funds, assets under management of $12 billion, and annual sales of $2 billion.

The deal would beef up ReliaStar's mutual fund earnings, too-they are expected to account for 11% of overall earnings, up from 3%.

ReliaStar has $23.2 billion of assets under management and life insurance in force of $304.7 billion.

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