Wilmington Trust Corp. of Delaware is close buying a small HSBC USA Inc. fund family, both companies say.
Rusty Giles, a vice president in Wilmington's investment advisory division, said Wednesday that it will certainly buy the HSBC Funds. The details will be "inked in" by the end of the week, he said.
An HSBC spokeswoman also said the deal is a certainty. The funds have $350 million of assets under management, she said.
Mr. Giles said the deal will advance Wilmington's main growth strategy: to form partnerships with or buy out the smaller fund families and asset managers of companies that are cooling on the business.
The strategy is particularly promising in the current bear market, Mr. Giles said, because many companies that got into investment management in the 1990s are now seeking a graceful way out.
HSBC USA put the fund family - its homegrown funds - on the block in July, after giving up on merging it with Republic New York Corp.'s $5.4 billion fund complex.
HSBC bought Republic in January of last year, but the boards of the two fund families could not agree on a number of issues, the spokeswoman said. She would not say what the sticking points were.
Mr. Giles said Wilmington is focusing mainly on smaller banks' unwanted funds. Though fund companies like Fidelity Investments and Federated Investors Inc. also buy unwanted assets, Wilmington generally pursues those that larger players would not find worthwhile, he said. For Wilmington, he said, "a family of $500 million is significant."
Wilmington is approaching other banks and asset management firms about taking over their unwanted funds or helping banks private-label Wilmington's funds to sell to their own clients, Mr. Giles said.
Wilmington said its own asset management subsidiaries, which include Roxbury Capital Management in Santa Monica, Calif. and New York's Cramer Rosenthal McGlynn, had about $6 billion of mutual fund assets at the end of June.
Mr. Giles said the HSBC deal could also give Wilmington more distribution firepower. Two of the funds it would get - a New York tax-exempt bond fund and a New York tax-exempt money market fund - are unlike any of Wilmington's current funds, and would help attract investors in that market, which is one of the largest for wealth management, Mr. Giles said.
The deal could even help Wilmington expand overseas, Mr. Giles said. The HSBC name carries far more weight in Europe and Asia, he said - the company is a subsidiary of London's HSBC Holdings PLC - and though Wilmington would probably rename the funds, it could market them overseas as former HSBC funds.
Jacqueline Reeves, an analyst at Putnam Lovell Securities in Boca Raton, Fla., praised Wilmington's strategy, saying that though small and midsize banks can manufacture as well as distribute mutual funds, doing both well is hard for them. As declining asset levels put pressure on profits, more banks are likely to leave the fund business, she said.
"If the fund is well managed, the economics are there," Ms. Reeves said. "If it is not, it just becomes a big expense."
