Being in the mutual fund and institutional money management business is almost as bad as being in commercial banking. Several companies in the industry have lost half of their assets between redemptions and the falling value of portfolios which have dropped with the market.

If the market continues to fall some of the public companies in the fund business will begin to lose large amounts of money. Their portfolio management, back office, marketing, trading, and administration costs can only be chopped by so much.

Based on their share prices, two fund companies are doing much worse than their peers. Shares in Alliance Bernstein (AB) and Janus (JNS) are trading off almost 70% over the last year.

The fund operators that are doing relatively better are T Rowe Price (TROW), Franklin (BEN), and Blackrock (BLK). For them to pick up the assets by purchasing one of the weaker companies would be an extraordinary deal. The costs which could be cut from management and back office expenses by combining two operators would be substantial.

Fidelity and Vanguard could also be buyers but as private companies that would seem to be less likely

There is not much M&A in the markets now, but one of these deals is less than six months away.

Douglas A. McIntyre

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