PEOPLE — J. CHRISTOPHER DONAHUE: SAME NAME, SAME GOAL, NEW FACE

Less than a month before Federated Investors’ planned public offering, the company’s 73-year-old founder has passed the torch to his son.

Federated announced late last month that J. Christopher Donahue, president and chief operating officer of the mutual fund shop since 1993, had replaced his father, John F. Donahue, as chief executive. The elder Mr. Donahue, who founded Federated in 1955 by selling mutual funds door to door, will continue to serve as chairman.

The Pittsburgh-based firm says the change wasn’t planned to coincide with the public offering, expected to take place this month. But John Donahue is among a growing number of fund company founders who are cashing in. He owns 12.6% of the company but plans to sell about 586,870 shares, a 1% stake, as part of the IPO.

His son is not selling any of his 4.6 million B shares, but the IPO would reduce his stake to 5.4% of outstanding shares.

The stock sale is taking place at a time when many investors are eager to buy stocks of asset managers who have benefited from the bull market. Federated itself is selling 2.6 million shares, and hoping to get $18 to $20 a share — or $46.2 million. In all, 16.2 million shares are up for sale .

The change isn’t expected to have much effect on the IPO or the direction of the company because the younger Mr. Donahue, 49, has been firmly entrenched at the top for the last few years. He joined Federated in 1972 as a law clerk.

growth, growth, growth

He says the company’s biggest challenge is to boost its name recognition and to continue to grow despite tough competition.

“His background is that of the founding father who sold mutual funds door to door and got into the investment management business,” J. Christopher Donahue says of his father.

“Mine is as a law clerk and wholesaling mutual fund products to bank trust departments. You bring different levels of experiences to the pot, but they result in the same kinds of drives: to get this company wider known as a world-class money manager and leverage off the distribution powerhouse we’ve been growing here.”

Indeed, the company has doubled its wholesale force to 152 since it broke off from Aetna Inc. in 1989.

The younger Mr. Donahue is credited with being one of the driving forces behind Federated’s efforts to expand its equity offerings, particularly international funds. Stock funds assets swelled 54% in 1997 to $11.7 billion from $7.6 billion the prior year. Global managed assets grew 69% during the same period. But about two-thirds of the assets under management are still in money market funds.

tenth in mutual funds

The company is the nation’s 10th-largest mutual fund shop, according to Financial Research Corp. in Boston. It had more than $96 billion in assets under management and $52 billion in administered assets as of March 31.

During his 25 years at Federated, Christopher Donahue has worn a number of hats. In 1974 he served as associate corporate counsel. He also spent several years selling cash management services to bank corporate trust clients. In the 1980s, he worked on the policy side of financial services operations and headed the marketing of mutual fund services to banks. From 1990 to 1993, he was president of the division that services bank mutual funds. He will remain president and COO.

“Clearly he has a great deal of industry experience and certainly knows the company as well, if not better, than anyone else,” says Matt Beaudry, an FRC consultant.