Smith Breeden to be acquired by European asset management firm

dbracken@newsobserver.comJune 4, 2013 

Smith Breeden Associates, one of the Triangle’s most prominent money-management firms, is being acquired by the European asset management company Amundi.

Smith Breeden, which has $6.4 billion in assets under management, will become a subsidiary of Paris-based Amundi and be renamed Amundi Smith Breeden. The company’s offices in downtown Durham’s American Tobacco Campus will become Amundi’s North American headquarters. Terms of the deal weren’t disclosed.

Smith Breeden, founded in 1982, specializes in fixed income markets such as mortgage-backed securities and corporate bonds. CEO Mike Giarla said the company has had suitors over the years, but none were as good a match as Amundi.

The company, a subsidiary of the French banks Société Générale and Crédit Agricole, is among the largest investors in European corporate credit and sovereign securities in Europe and Asia, with about $1 trillion in assets. But Amundi’s products and geographic footprint have little overlap with Smith Breeden.

“The markets are so interrelated now that we feel like we’ll be better managers of U.S. portfolios because we’ll have colleagues on the ground managing assets in Europe and Asia,” Giarla said.

He said the move will also allow Smith Breeden to better adjust to the needs of its clients, which include pension funds, endowments and other large institutional investors.

“We figure many of those clients do want and will want more global products that we’ll be overtime working on with Amundi,” Giarla said. “We’ll be managing the U.S. fixed income portion of those.”

Giarla will remain CEO. Patrick Pagni, Amundi’s senior regional officer for North America, will become Amundi Smith Breeden’s executive chairman.

Amundi has small offices in New York and Montreal. Giarla said some of those employees, including Pagni, are expected to relocate to Durham. The deal isn’t expected to result in any changes to Smith Breeden’s investment process or its personnel. The company has 60 employees, 53 of which are in Durham.

Smith Breeden is known for its expertise in mortgage-related investments, particularly the government-sponsored entities Ginnie Mae, Freddie Mac and Fannie Mae. The firm’s assets under management declined sharply following the financial crisis. In 2006, it had roughly $28 billion under management.

For Amundi, the acquisition of Smith Breeden gives it a foothold in U.S. fixed income markets, which typically make up the largest portion of institutional investors’ global fixed-income portfolio.

Smith Breeden’s mortgage expertise is also likely to become even more valuable as the housing market recovers and the future of Fannie and Freddie become more clear to investors.

“We’re seeing increasing interest in those markets,” said Steve Eason, an executive vice president with Smith Breeden. “We’re very well positioned for that as we see more interest from investors outside the U.S.”

He added that Amundi’s decision to keep the Smith Breeden name says a lot about what the company has been able to build over the past three decades.

“It’s very good news for us but also for Durham and North Carolina,” Eason said. “This is one of the largest asset management firms in world and they want to build their North American headquarters here.”

Bracken: 919-829-4548

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