Federated to Expand Services in Chile - Analyst Blog

Pittsburgh, Pennsylvania-based Federated Investors, Inc. FII, in an attempt to expand its services in Chile, entered into an agreement with RJ Delta Fund Management to acquire its marketing services. RJ Delta is an Argentina-based subsidiary of Raymond James Financial, Inc. RJF.

RJ Delta will promote six Federated Investors' products as approved by Comision Clasificadora de Riesgo. The products are Federated Emerging Market Debt Fund, Federated InterContinental Fund, Federated Institutional High Yield Bond Fund, Federated International Leaders Fund, Federated Strategic Value Dividend Fund and Federated Prime Value Obligations Fund.

Implications of the Latest Move

The aforementioned agreement will no doubt enable the company to capitalize on RJ Delta's client base comprising leading pension funds, institutional investors and institutional wealth managers.

However, the investment capacity of institutional investors and wealth managers are highly dependent on the performance of the domestic economy. Unfortunately, the Chilean economy has not been performing well over the last few years. As per a Bloomberg report, in Jan 2014, the country's gross domestic product growth was the slowest in the past four years.

Hence, it is less likely for Federated Investors to benefit from institutional as well as wealth managers. However, as mentioned in the press release, RJ Delta will primarily promote Federated Investors' funds in the country's pension market worth $200 billion.

The pension funds, characterized by assured but low rate of return, are usually preferred by risk-averse individuals such as pensioners. The pension funds usually have ample capital to invest as the demand for these funds is not directly related to the economic pace of growth. In fact, the demand for these funds may rise with increase in market volatility.

Therefore, if Federated Investors continues to focus in these funds, utilizing RJ Delta's expertise and connectivity in the country's extensive pension market, we expect it to significantly benefit.

Federated currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked investment managers include Waddell & Reed Financial, Inc. WDR and Fortress Investment Group LLC FIG. Both these stocks sport a Zacks Rank #1 (Strong Buy).