Moves to boost retail programs within weeks of upping processing scale. Federated Investors has agreed to acquire quant manager MDT Advisers (MDT), partly in an effort to expand its mutual-fund and separately managed account (SMA) programs. Federated bought some growing space a short while back by outsourcing its SMA middle and back offices to Citigroup.

Federated will pay $110 million for MDT initially, with additional growth-contingency payments due over three years that could reach $130 million. Cambridge, Mass.-based MDT�s investment team will stay put for now. The two sides expect to close the deal in July.

Fits several ways

�Combining the proven investment acumen of MDT's team and process with Federated's distribution muscle will give our firm a powerful new growth opportunity,� says Christopher Donahue, president and CEO of Federated. �The MDT mutual fund portfolios will significantly enhance Federated's product offerings by creating a quantitative line of equity mutual funds to complement the 39 equity mutual funds that use Federated's proprietary investment process that blends quantitative and fundamental research.�

For MDT president and CEO Gordon Ceresino the deal makes cultural sense as well as business sense. �We opted to collaborate with Federated, not only because of their longstanding reputation in the industry and distribution strength, but also because they share our core business values by focusing on long-term investors,� he says.

Pittsburgh-based Federated managed $217.5 billion at the end of March 2006, including a $2-billion, 6,000-account SMA program. At end-of-March asset levels the deal with MDT stands to increase Federated�s equity holdings by 22% to $37.7 billion. �FWR

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