Research houses take different views

The two managed fund research houses have taken different positions on Westpac's acquisition of BT Funds Management.

Morningstar says the $1.1 billion deal is broadly positive for investors, consequently it has reconfirmed the star ratings of both organisations.

FundSource has put a hold on all of BT's funds.

Morningstar says the corporate strength of both organisations will be improved, but more importantly two complementary businesses will be brought together.

It says that the combined "platform is expected to deliver improved benefits to customers in terms of a larger product range, increased customer access channels as well as strong investment management capability."

"Investment advisers can expect to get better services and an enhanced range of products." The acquisition is also expected to bring significant cost synergies in the areas of client service, product management and development, technology platform and investment management. Morningstar expects the product and client service functions of WIM to be integrated with BTFM at a future date.

In the all-important area of investment management Morningstar comments that both BT, and WestpacTrust's current investment manager, ING, have a high level of sector strength in the domestic asset area, however it notes that "there is a divergence of investment styles in New Zealand equities. BTFM has a ‘value’ bias while INGNZ has a ‘growth’ bias."

Although Morningstar is positive on the move it notes some risks.

"While the initial assessment appears sound from the perspective of all stakeholders, certain risks remain. These include various integration risks such as a cultural mismatch between the two organisations and a risk of performance slippage during the integration process."

FundSource put all BT's recommended funds on hold until more analysis is done of the deal. This is standard practice for the research group in a situation like this.

It advises people to hold onto their existing funds, but not add more money to their holdings.

There are four main concerns over the deal. One is what happens to the people who manage the money, and the second relates to how BT's international equities portfolio will be managed.

Westpac says that following the completion of the deal this money will be outsourced to a new external manager with a style similar to BT.

The other concerns relate to problems associated with merging a bank and a funds management organisation and the fact that BT and Westpac's other recent acquisition, Sagitta (formerly Rothschild Australia) are direct competitors.