NUTT GIVES AFFILIATED NEW MEANING: OUTSIDE AMG IS WHOLE OTHER FUND EMPIRE

Some might call it a “Nutt” house. In fact, Bill Nutt is building an empire.

Mr. Nutt is best known as the approachable co-founder and chief executive of Boston’s Affiliated Managers Group Inc. — one of the country’s fastest-growing asset management firms — but that’s only one piece of his financial services realm. He also controls a leading research firm and a mutual fund sales, marketing and distribution business for more than 430 funds that also ranks among Boston’s 10 largest advertising agencies.

“I don’t know much about Bill Nutt’s other businesses at all,” says Alexander Paris Jr., an analyst who follows AMG at Barrington Research in Chicago. “I better go back and dive into it in case a client asks me the same question.”

While Mr. Nutt is hardly the first executive to run more than one business, he walks a fine line in balancing the interests of publicly held AMG with those of his private ventures — many of which could benefit by providing services to AMG affiliates.

“You wouldn’t want to be accused of self-dealing in a business where reputation is paramount,” says Mr. Paris.

Since 1993, 53-year-old Mr. Nutt has amassed a group of five financial enterprises, including AMG. The others are Funds Distributor Inc., which specializes in fund sales and marketing; Financial Research Corp., a consulting firm; FDI Finance, which provides financing to mutual fund companies that offer B shares, and Boston Institutional Services, which is one of the nation’s largest companies providing institutional brokerage services to money managers in return for research.

All but AMG, which went public last year, are wholly owned by privately held Boston Institutional Group. As head of AMG, Mr. Nutt earned $845,390 in 1997, according to documents filed with the Securities and Exchange Commission. What his salary is — if he earns one — as chairman of Boston Institutional Group is not a matter of public record.

“I spend 100% of my time working on AMG,” Mr. Nutt says of the company that owns 13 affiliates with $62 billion under management. “These other businesses have excellent management teams in place. They’re run all on their own.”

By all accounts, Mr. Nutt maintains a firewall between AMG and Boston Institutional Group’s subsidiaries. AMG and Boston Instituional are headquartered in separate buildings in the city’s financial district and Mr. Nutt meets with the heads of each unit once or twice a month to discuss strategy.

Only one AMG affiliate, Skyline Asset Management LP, uses Funds Distributor to market its funds. And that relationship was forged well before AMG bought the Chicago firm in 1995.

“I found out that Bill was acquiring Skyline the day the press release went out,” says Betsy Connolly, president and chief executive of Funds Distributor. “We’re not really in the know and that is by design.”

Neil Bathon, president of Financial Research Corp., concedes the division between the firms can be a little frustrating at times.

“I know I would like to work with AMG’s companies,” he says. “But Bill maintains the position that if any of us wants to work with an affiliate we are on our own.”

The story of Mr. Nutt’s fiefdom began in 1993. Mellon Bank Corp. of Pittsburgh purchased money manager Boston Co., where he had been president for four years, and didn’t have a place for the western Pennsylvania native and two of his divisions, Boston Institutional Services and Funds Distributor.

Mr. Nutt assembled a group of buyers, combined them into a single enterprise and two years later acquired Financial Research Corp.

Mr. Nutt also started talking to Boston venture capitalist TA Associates, which had made a name as an early backer of Federal Express Corp. With $20 million coming from TA and $1 million of his own, AMG was born.

In the fall of 1997, AMG — with 10 firms in its portfolio — went public and sold a 48% stake for $202 million. Today, Mr. Nutt’s 3% holding is valued at $15.6 million, according to Technometrics Inc. in New York, which monitors stock ownership.

Mr. Nutt says he never intended to be involved in day-to-day operations of Boston Institutional Group’s subsidiaries. “I was the catalyst in bringing some awfully good people together,” he says.

While AMG is clearly the object of Mr. Nutt’s affections, Boston Institutional Group is no small thing. The holding company is divided into two main units: Funds Distributor, which is headed by Ms. Connolly, and Boston Institutional Services, which is run by Jack Gomez. Joseph Tower, who heads FDI Finance, and Financial Research Corp.’s Mr. Bathon both report to Ms. Connolly.

Funds Distributor is among the fastest-growing of the subsidiaries. The firm was tapped in November to do sales and marketing for Dresdner RCM Global Investors LLC, the German banking company’s U.S.-based investment arm which runs $1.7 billion in mutual funds. Funds Distributor’s revenues nearly doubled in 1998 and the size of its staff increased 75% to 140, according to Ms. Connolly.

Funds Distributor’s internal advertising group posted $28 million in capitalized billings, or $4.2 million in revenues, last year — placing it among Boston’s top 10 advertising agencies, according to Pile and Co., a marketing consultancy there.

So far, says Ms. Connolly, most of the division’s earnings are being plowed back into Boston Institutional Group.

“We’re trying to reach a point of leverage,” she says of Funds Distributor, which competes with such better-established fund administrators as Bisys Group Inc. of Little Falls, N.J., and Atlanta-based First Data Corp. “We’re trying to get far enough ahead that it would be very difficult for someone to catch up to us.”

While Mr. Nutt does not encourage collaboration between AMG and Boston Institutional Group’s subsidiaries, he does encourage it among the units themselves. Financial Research Corp., for example, is working closely with Funds Distributor to look for opportunities to export their businesses to Canada.

“We are very integrated,” Ms. Connolly says. “A company could hire us to provide sales and marketing services and we would use (Financial Research Corp.’s) knowledge and database to do the competitive analysis that we need to do work on an ongoing basis for that client. And they could pay through trading securities with Boston Institutional Services.”

Originally founded in 1971, the soft-dollar firm has more than 600 money manager clients.

Ms. Connolly’s company could also cross-sell FDI Finance, which had an annual growth rate of 45% over the past three years. Boston Institutional declines to provide total revenue figures for its units.