Old Mutual, the South African pensioned fund management group, says that US$1.7 billion was withdrawn from its US fund management business, Pilgrim Baxter, during December – mainly by institutional accounts.
It followed an SEC investigation into the company as part of its inquiry into mutual fund market timing. Founders Gary Pilgrim and Harold Baxter were forced to quit the firm in November, after being charged with fraud by the SEC and New York Attorney General Eliot Spitzer. Pilgrim Baxter reportedly allowed hedge funds to trade in and out of its mutual funds within short periods.
As at the end of 2003, Pilgrim Baxter’s assets under management stood at US$5.92 billion, down from $7.4 billion on September 30, a decline of over 20.3% in the final quarter of the year. Pilgrim Baxter had total assets of about $25 billion when Old Mutual purchased it in 2000.
However, Old Mutual reported an increase of over 21% during 2003 in assets in its US funds business overall to $154.1 billion, against $127 billion at the end of 2002 – but this matched almost exactly the rise in the markets during the year.
Old Mutual still owes Pilgrim and Baxter $69 million as part of the original buy-out agreement.