Sunday, February 7, 2016

Westwood Holdings to acquire Philadelphia Fund

Shareholders of the tiny mutual fund, started in Philadelphia in the '20s, will vote on a deal Nov. 6 under which a Westwood fund will absorb its $50 million in assets.

Westwood Holdings to acquire Philadelphia Fund


The Web site of the Philadelphia Fund shows the city skyline in silhouette.

But this mutual fund has had little to do with its namesake for years. In 10 days, even the name will go away, spelling the end for a fund with roots pre-dating securities regulation.

Shareholders of this mutual fund with $54 million in assets as of Sept. 15 are being asked to approve a reorganization under which Dallas-based Westwood Holdings Group Inc. would absorb the assets into its WHG LargeCap Value Fund.

The reason for the deal? Boca Raton, Fla.-based Baxter Financial Corp. is getting out of the asset management business. Its president, Donald H. Baxter, has been the portfolio manager for the no-load fund since May 1987.

Another reason is that the Philadelphia Fund has been too small in terms of assets to generate “economies of scale,” Baxter writes in a letter to shareholders.

In Westwood, Baxter Financial found a firm with economies of scale. Westwood had assets under management of $8.2 billion as of June 30. Its WHG LargeCap fund had total net assets of $128 million as of Sept. 30.

Philadelphia has earned its place in mutual fund history, but it’s largely been written by the Vanguard Group, in Malvern, which manages about $1 trillion in assets.

The Philadelphia Fund never experienced much of a growth spurt, even though fund-tracker Lipper’s rankings show it has tended to perform pretty well compared to other funds with a large-capitalization value strategy.

Like nearly every stock fund, the Philadelphia Fund’s total return was negative for 2008 - down 24.5 percent. But its peer group was down 36 percent.

Today, there’s nothing Philadelphia-like about the fund’s portfolio, which had 24 big-name stocks, such as McDonald’s, Wal-Mart and Coca-Cola, at the end of August.

All that’s left is its history. A group of businessmen, led by Philadelphia banker W. Wallace Alexander, pooled about $200,000 to start the fund in 1923. According to Bloomberg News, its management was transferred to New York’s Fahnestock & Co. in 1952.

Baxter acquired control of the fund in 1989. Twenty years later, he’ll turn it over to Westwood, and one of the thousands of funds that overpopulate the mutual fund industry will be gone.

Inquirer Columnist
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Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at

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