Touchstone To Purchase Constellation; Formats Are Similar; Both find subadvisers to run their portfolios; will combo cut costs?(MUTUAL FUNDS)(FUND INDUSTRY TRENDS)

Byline: KEN HOOVER

Touchstone Investments, with $4 billion in assets, announced it's acquiring the 18-month-old Constellation family of funds, adding $2.8 billion to the Cincinnati company's asset base.

The two fund families operate the same way. Rather than hiring their own managers to run funds, they seek out proven managers of primarily institutional money and let them run their funds using the same strategy and stock picks they are already using. The practice, known as subadvising, is widely used in the mutual fund industry. But only a select number of fund families use it for all of their funds.

It's the first acquisition in several years for Touchstone, owned by Western & Southern Financial Group. Terms were not disclosed.

"We picked up $2.8 billion in assets and fill in the style boxes they have," said Touchstone President Jim Grifo.

Touchstone is a growth shop, and Constellation, with 27 funds, leans toward value. So the acquisition helps Touchstone build a portfolio of value funds.

Another way the two companies fit well, says Grifo, shows in the differences in how their funds are distributed. Constellation has taken the no-load approach, selling its 25 funds through financial planners and advisers, 401(k) plans and private banks.