GLOBAL – Mellon Financial Corp. has combined its retail mutual fund arm Dreyfus with its institutional asset management business under vice chairman Ronald O’Hanley.

The Pittsburgh-based group said the move, effective from January 1, would create a new organization called Mellon Asset Management.

It comes after reports last year that Mellon was under pressure from investors to maximize value and that it had had exploratory talks with rivals such as State Street and Northern Trust.

Mellon chairman Martin McGuinn said yesterday that the revamp would “further enhance our competitiveness and effectiveness”.

Under the new structure, Dreyfus Corp. chairman and chief executive Stephen Canter will report to O'Hanley. Mellon began combined financial reporting for the two businesses in the third quarter of 2005.

It said: “The creation of Mellon Asset Management is part of Mellon's ongoing efforts to align its asset management and distribution businesses to ensure the highest level of investment performance and client service.”

"The creation of Mellon Asset Management also reflects the fact that in the asset management business, clients for the retail and institutional segments are fast converging as individual investors and their advisors are seeking the consistency of process, personnel and performance that institutional products offer," O'Hanley said.

"This integration of our manufacturing and distribution groups for institutional asset management and retail products and services will enable us to better develop, coordinate and bring to market innovative products."

Canter added: "This move will enhance our ability to coordinate, collaborate and improve the efficiencies of our investment management and distribution resources and, ultimately, mean better service for our Dreyfus fund shareholders.

“The Mellon and Dreyfus commitment to our mutual fund business remains clear and unequivocal."

Mellon Asset Management also includes UK-based Mellon Global Investments and Newton Investment Management.

New York-based Dreyfus was established in 1951 manages around $170m in mutual fund assets. Mellon bought it in 1994.

In September Newton said its institutional assets had fallen to just under 50% of total assets under management – although they remained “core” to the firm.