In an effort to re-align its product portfolio, on Wednesday, Wells Fargo & Co.’s (WFC) investment manager division, Wells Fargo Funds Management, LLC and its affiliate Evergreen Investment Management Company, LLC announced their intention to reduce the size of their mutual fund offering from 177 to 128 products, thereby removing 49 products from the consolidated portfolio.

Also, Wells Fargo is mulling to do away with the “Evergreen Investments” brand, but continue with its advisory services by the current management team under Wells Capital Management. However, management awaits shareholders’ approval.

The merger of Evergreen into Wells Fargo Funds Management will bring 27 Evergreen funds under Wells Fargo Advantage Funds, while 53 funds will merge from both the organizations and 5 funds will be liquidated. The funds for liquidation will no longer be available for purchase by new shareholders from Jan. 29, 2010, and all the 5 funds are expected to be fully liquidated by Apr. 30, 2010.

Evergreen Investment became a part of Wells Fargo post the Wachovia acquisition. However, after the acquisition, outflows declined sharply in Evergreen, another reason for the proposed merger. The fund merger and reorganization strategy has also been taken up to reduce cost of fund operations through elimination of redundant fund offerings, thereby optimizing the economies of scale. The mergers are expected to occur in July 2010.

Wells Fargo’s asset management group is strenuously working out ways to control costs, primarily through layoffs. Currently, the division positions 1,700 employees, down from 2,100 a year ago. The proposed merger and reorganization is also expected to add to the job suspensions. The company is also reported to have cut jobs for 26 employees due to the ongoing weakness in the real estate sector, and has further planned to layoff 26 additional employees by March 2010. However, Wells Fargo expects to provide appropriate compensation and benefits to it’s laid off employees.

We believe that the current re-engineering efforts are being taken up by most of the companies across the industry. During its third quarter of 2009, Ameriprise Financial Inc. (AMP) had also declared cost savings primarily through layoffs. As the companies go into damage-control mode post the peak of financial crisis, such developments are inevitable.

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