In the wake of the announcement that Bank of America will sell mutual fund provider Columbia Management, a lot of big numbers have been floating around. For starters, buyer Ameriprise Financial will pay up to $1.2 billion for the acquisition, which will bring 114 new funds under its umbrella. After the addition, Ameriprise will have approximately 200 funds with around $400 billion in combined assets. Meanwhile, the deal is expected to save Ameriprise up to $150 million per year.
So what do all these numbers mean for the average investor who holds a Columbia or Ameriprise fund? The answer, experts say, is very little. Despite the magnitude of the acquisition, investors won't see much of an immediate impact on their holdings. Still, here are three things to look for.
Fee changes. One of the deal's goals is to lower costs for investors by streamlining the management process. Karen Andersen, an analyst for Morningstar, says she would particularly like to see Ameriprise's RiverSource funds lower their expense ratios. "I think that Columbia has across the board been a little bit better on expenses," she says. "Overall, RiverSource hasn't done a bad job on that front, but covering RiverSource, I was a little disappointed—within the last year, they've passed some expenses on to shareholders that didn't really seem necessary."
Mergers. Ameriprise's leadership has signaled that it may merge some funds to eliminate redundancies that result from the combination. Practically, this means that some of the underperforming RiverSource funds could be rolled into similar Columbia ones and vice versa. Analysts expect that RiverSource funds will experience the brunt of the changes. Meanwhile, the Columbia brand, which will keep its name under the deal, will most likely be used to bolster RiverSource. Jeff Tjornehoj, Lipper's research manager for the United States and Canada, is reserving judgment on any potential mergers. "It's anyone's guess at this point how much of a concern that ought to be," he says.
Growing pains? Money market funds aside, Ameriprise will (by its own estimation) become the country's eighth-largest mutual fund company as a result of the deal. Meanwhile, mergers could leave individual funds with more assets than they have traditionally managed. "I think that this is a pretty big change that's going to be happening," says Andersen. "There may be a year or so of growing pains in terms of combining those two cultures and the process of deciding which management teams to stick with."