The transaction, which will add $52bn (£39.3bn, €46.5bn) to MUFG’s assets under administration, is expected to close in the fourth quarter of this year, subject to regulatory approvals.
Terms of the deal were not disclosed.
Fund administration expansion
Rydex is the fund administration, fund accounting, and transfer agency services platform for Guggenheim Investments’ intermediary product line.
The deal to buy Rydex follows MUFG’s acquisition of UBS Asset Management’s Alternative Fund Services (AFS) in December 2015, which formed part of the company’s strategy to build a global industry-leading fund administrator.
The deal
The assets serviced by Rydex primarily consist of Guggenheim and Rydex branded mutual funds, exchange-traded products and closed-end funds, for which Guggenheim Investments will continue to serve as investment advisor.
Upon completion, MUFG will acquire all of Rydex’s business and intends to provide a seamless transition for its employees and clients.
1940 Act
The acquisition will add regulated 1940-Act mutual fund and exchange traded fund services expertise to MUFG’s existing service proposition; which spans single manager, fund of hedge fund, private equity and real estate funds, pension funds and traditional asset managers.
Alternative fund managers are increasingly establishing 1940-Act fund structures, according to John Sergides, managing director, global head, business development and marketing, MUFG Investor Services.
Established by the US Congress in a bid to bolster financial markets after the 1929 Wall Street crash, the 1940-Act defines the responsibilities and limitations of open-end mutual funds, unit investment trusts, and closed-end funds that offer retail investment products.
Among other things, the 1940-Act requires funds to register with the Securities and Exchange Commission (SEC) and have a board of directors, 75% of whom must be independent.
The funds must limit their use of leverage and retain sufficient cash to enable investors to redeem their shares at any time.
Liquid alternative demand
Sergides said: “Demand for liquid alternative strategies has risen significantly in recent years as retail investors recognise the return potential and diversification benefits relative to traditional asset classes.”
Nikolaos Bonos, head of Rydex Fund Services, commented: “MUFG Investor Services will provide new opportunities for us to extend and enhance our 1940-Act fund administration experience for the benefit of our current and future clients.
“Aligning our team within the MUFG Investor Services group will enable us to respond to rising demand for liquid alternatives with a comprehensive service proposition that supports the development of investment managers’ businesses.”
