Rydex Investments, the Rockville mutual fund manager that designed such innovative vehicles as funds that work inversely to market trends, is being acquired by retirement plan specialist Security Benefit, the two companies announced yesterday.
Rydex will keep its name, funds and staff, and will operate as a division of Security Benefit.
"The business models of both companies work," Kris Robbins, president and chief executive officer of Topeka, Kan.-based Security Benefit, said in a conference call with reporters. "Our philosophy is: 'Don't mess it up.' "
"In the short term, our products will remain the same," said Carl Verboncoeur, Rydex's chief executive. However, he said, the two companies see "product-engineering opportunities" to create new funds and other products in the future. He said staffing would be "staying intact with the same folks," about 225 people working in Rockville.
Terms of the transaction were not disclosed.
Both companies are privately held. Rydex manages about $15 billion in assets; Security Benefit, approximately $20 billion. The combined company will have relationships with 40,000 independent broker-dealers and advisers who can sell their products.
Rydex's founder and principal owner, A.P. "Skip" Viragh, died three years ago. Since then, Rydex has been owned "by the family, in effect by a trust," and "the family felt the need to diversify," Verboncoeur said. He said Rydex talked with a number of potential suitors, whom he declined to identify, over the past six to eight months before settling on Security Benefit.
"The relationship among the family members and the management was rather awkward, and they probably didn't know what the next step would be," said Jeff Tjornehoj, a senior research analyst at Lipper Inc. who follows Rydex. "Selling it was probably the most logical answer."
Tjornehoj said Rydex, founded in 1993, was "a trailblazer in some of the non-correlated products" - that is, funds that behaved independently from the market or opposite to market trends. Some, he said, were designed to go up when the market when down, others to go up twice as much as the market.
Security Benefit is a 115- year-old company that has reshaped itself in the past decade, when it got out of the life insurance business. It offers annuities and some traditionally managed funds. It also manages retirement plans for individuals and for employers, generally small to mid-size employers and school systems.
Security Benefit has been offering Rydex funds to its clients for seven years.
Robbins said changes in demographics and a "responsibility shift" as fewer individuals get defined-benefit pensions create an opportunity for different types of retirement investment.
Verboncoeur said 75 million baby boomers are nearing retirement, and many are reaching a point where they are more concerned about protecting themselves against market declines than with accumulating assets.