August 9, 2018 / 11:59 PM / 7 days ago

MassMutual studying strategic options for OppenheimerFunds -sources

NEW YORK, Aug 9 (Reuters) - Massachusetts Mutual Life Insurance Co (MassMutual) is working with an investment bank to consider strategic options for its OppenheimerFunds business, which could include a potential merger or partial or full sale of the asset manager, three sources aware of the matter said on Thursday.

Fund managers globally are considering their future options as the sector grapples with a number of factors impacting profitability, including high investment costs for technology and compliance, as well as a move by investors toward “passive” funds which charge low fees.

MassMutual’s strategic review of OppenheimerFunds, which had more than $249 billion of assets under management at the end of July, has just begun and no decisions have been made about its future structure, according to the sources, who spoke on condition of anonymity as the information has not been made public.

The sources stressed current conversations were more theoretical in nature, but potential options for OppenheimerFunds include merging with another asset manager or a partial or full sale of the New York-based company.

Springfield, Massachusetts-based MassMutual, which is being assisted in the strategic review by investment bank Lazard Ltd , could also choose to retain OppenheimerFunds in its current guise, the sources added.

A spokesman for MassMutual declined to comment.

Questions about the future of asset management - especially for “active” managers that pick the investments in their funds as opposed to “passive” funds following an index - have prompted a wave of dealmaking aimed at gaining scale and cutting costs.

Last year, UK-based Aberdeen Asset Management and Standard Life completed an 11-billion-pound ($14.1 billion) merger, while Britain’s Henderson Global Investors and U.S. rival Janus Capital Group Inc closed a $6 billion tie-up.

OppenheimerFunds was founded in 1959 and has offices in five U.S. cities. While best known for mutual funds, the company now offers investments in every major asset class to clients which include financial advisers, as well as individual and institutional investors, according to its website.

Bloomberg first reported that MassMutual was considering the sale of OppenheimerFunds, citing people familiar with the matter as saying it could be valued at more than $5 billion. {nFWN1V01MR]

$1 = 0.7800 pound Reporting by David French Editing by Tom Brown

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