Principal jockeys for a spot in the retirement mkt

FWR Staff

31 July 2006

Asset manager sees acquisition of WM Funds as a way in with aging boomers. Principal Financial Group has agreed to acquire mutual-fund manager WM Advisorsfrom community banking giant Washington Mutual for $740 million in cash. Des Moines, Iowa-based Principal says the addition of WM Advisors and its WM Funds -- provider of "investment advisory services" to mutual funds, variable-trust funds and asset-allocation portfolios in about 800,000 fund-shareholder accounts -- will expand its presence in the soon-to-boom post-retirement market.

76 million

"The acquisition of WM Advisors represents an exceptional strategic fit for The Principal," says Barry Griswell, Principal's chairman and CEO. "This transaction adds important scale to one of our key asset accumulation businesses, it further strengthens our global asset-management capability and it increases our presence with over 28,000 independent financial advisors who will play an increasingly important role in securing the retirement future for over 76 million baby boomers."

The addition of WM Advisors makes Principal Mutual Funds the 43rd largest U.S. fund family, with more than 100 funds under management. More important, it gives Principal "an established platform to access the retail markets as well," according to the company. It also expands Principal's portfolio of offerings WM's target-risk funds as a complement to its target-date funds.

Principal bought ABN AMRO's 401 business in 2005.

Washington Mutual's sale of its fund division to Principal follows a small but noteworthy trend among multi-service banks and brokerages to ditch asset-management businesses. The biggest examples of that are Citigroup's sale of its investment management business to Legg Mason in 2005 and an analogous deal, announced early this year, between Merrill Lynch and BlackRock.

Des Moines, Iowa-based Principal managed $205.3 billion in assets on 31 March 2006. Seattle-based WM Advisors manages around $26 billion, $21 billion of that in WM Funds. --FWR