Victory Capital completes purchase of USAA’s asset management business

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USAA’s portfolio of 47 mutual funds and six exchange-traded funds is now under new ownership.

Ohio-based Victory Capital Holdings on Monday announced that it completed its acquisition of USAA’s investment management business in a deal valued at $850 million.

Payments from Victory based on revenue from the USAA unit over the next four years could increase the value of the transaction by as much as $150 million.

Victory plans to move its headquarters from the Cleveland area to San Antonio. The company will make an announcement on its new headquarters in the coming week, Victory Chairman and CEO David Brown said. Victory’s local staff is operating at USAA’s campus for the time being.

USAA Asset Management has overseen the investments of USAA customers who have put money in mutual funds, exchange-traded funds (ETFs) and a college savings plan.

“It’s a great day for the shareholders of the USAA funds and ETFs and the 529 (college savings) plan,” Brown said. “It’s a great day for USAA members. We’re really looking forward to working with USAA going forward and really look forward to providing great investment management services to them. (We’re) excited to now have this be day one and really get going on it.”

USAA announced in November that it was selling the business to Victory. It’s the largest transaction USAA has done in the past two decades, possibly ever, CEO Stuart Parker said at the time.

As of April 30, Victory had $61 billion in assets under management, while the USAA arm had $81.3 billion in assets under management.

“Victory Capital will continue providing (USAA) members quality products and service, plus a greater variety of mutual funds and ETFs,” Parker said Monday. “We will work with Victory Capital and our members to ensure a smooth transition.”

Victory has hired about 230 of USAA Asset Management’s 300 employees. USAA cut 53 jobs in the wake of the transaction’s announcement. The layoffs are permanent and were slated to be completed in three phases from June through September. Those remaining employees not hired by Victory were given new roles at USAA, the San Antonio-based insurer and financial services company said.

Victory indicated that it planned to create 50 additional jobs paying an average base salary of $96,000. It reported that it had 263 employees at the end of last year. Brown couldn’t say how many would relocate to San Antonio.

“USAA’s asset management company is a top-tier investment management business,” Brown said. “It’s got a lot of great aspects to it: the investment management personnel, the different product sets that they have, mutual funds, ETFs, (its) 529 plan, being able to work with the members and directly with the military community.”

USAA has more than 13 million customers, comprising current and former members of the military and their families.

All of USAA’s fixed-income funds are highly rated by mutual fund analysis company Morningstar, “providing an opportunity for distribution outside of USAA members,” William Blair analysts wrote in a May report.

Meanwhile, Victory has added several of its investment franchises to the management of USAA equity funds. That led Morningstar to downgrade two of the USAA funds it follows — USAA World Growth Fund (USAWX) and USAA International Fund (USIFX) — to “neutral.”

“The ‘neutral’ rating means we don’t have the conviction that this strategy can beat either its peers or its benchmark … looking over a full cycle,” Morningstar analyst Connor Young said.


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Massachusetts Financial Services, or MFS, had managed 70 percent of USAA International Fund’s assets. The new group of managers includes Victory’s Victory Solutions team.

“MFS is a team we like a lot,” Young said. “It’s an established team with good managers, good resources, a proven approach. When it was a ‘bronze’ rated fund, I think it was safe to say that (MFS) was a significant driver of that ‘bronze’ rating.”

Young didn’t know why MFS is no longer a manager for the International Fund but said MFS continues as a manager for the World Growth Fund.

Morningstar analysts will meet next week with Wasif Latif, who has been USAA’s head of global multiassets, to learn more about reasons for the changes, Young said.

Brown said there weren’t a lot of changes to the funds’ management.

“I would just say, in general, that any of the changes that we’ve made, we really feel like it’s an evolution to the product and the products,” he said. “Ultimately, there’s going to be a better product for (USAA) members and really the shareholders of the funds.”

Victory expects to achieve $120 million in cost savings from the transaction, up $10 million from a previous estimate. About $75 million in savings already has been realized, with the balance expected to occur by no later than October 2020.

Patrick Danner is a San Antonio-based staff writer covering banking and civil courts. Read him on our free site,, and on our subscriber site, | | Twitter: @AlamoPD

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