Goldman fills gap with key fund purchase

Goldman Sachs Asset Management got its Christmas shopping done early this year. The firm announced that it has purchased the $153 million Rising Dividend Growth Fund from Dividend Growth Advisors LLC. It did not disclose the cost. Dividend Growth Advisors will stay on as the fund's subadviser. Goldman will merge the fund's assets into the newly formed Goldman Sachs Rising Dividend Growth Fund, which it plans to launch in January. The fund, which has a five-star rating from Morningstar Inc. and five-year annualized returns of 4.38%, ranks in the top 2% of large-cap-blend funds. That track record, along with Goldman's lack of a dividend-focused mutual fund, made Rising Dividend Growth an attractive target, said James McNamara, president of Goldman Sachs Funds. “[Acquisitions] are a quick way to get a new fund to market,” he said. “A good fund that's been undermarketed could be a good pickup for them,” said Geoff Bobroff, president of Bobroff Consulting Inc. “Organic growth is hard to come by in a sideways market; a new fund with a good track record let's you go out and beat the bushes with it,” he said. The Rising Dividend Growth Fund invests only in companies that have a track record of at least 10 years of annual dividend increases of at least 10%. The fund's holdings are approximately 80% large-cap stocks and 20% master limited partnerships. It yields 1.87%. When Goldman approached Dividend Growth Advisors about purchasing the fund, Troy Shaver, president of the Ridgeland, S.C.-based firm, saw it as an opportunity to help increase the fund's distribution. “We don't have distribution capabilities,” he said, “and they have it not only in the U.S. but worldwide.” Goldman's larger asset base — approximately $821 billion in assets under management, compared with Dividend Growth Advisors' $750 million — means the firm will be able to lower the fund's expense ratio. The Rising Dividend Growth Fund currently charges 1.65%, but the Goldman Sachs Rising Dividend Fund is expected to charge only 1.2%, according to Mr. Shaver.