Alliances of banks, mutual funds grow more attractive to players.

NEW ORLEANS -- Banks and mutual fund companies are looking better and better to one another.

That was the clear message from four top fund executives who discussed strategic alliances at a mutual fund conference sponsored last week by the Bank Securities Association.

The four executives -- from Eaton Vance Corp., Putnam Financial Services, Massachusetts Financial Services, and John Hancock Financial Services -- agreed that combining with a bank wouldn't be such a bad idea.

"One of the best decisions we made three or four years ago was to start up a separate distribution force for banks," said Dozier Gardner, president of Eaton Vance Corp., Boston.

Going forward, he said, "our decision is whether to remain in partnership with you, or whether down the line we come together."

Enthusiasm for Alliances

The potential for combinations between banks and fund companies became a hot topic last week following revelations that Mellon Bank Corp., Pittsburgh, had made an aborted bid to buy Dreyfus Corp., New York.

Mr. Gardner's colleagues on the panel, though somewhat less direct, were nevertheless enthusiastic about the prospects for cross-industry alliances.

William Shiebler, president of Putnam Mutual Funds, Boston, said he expects to see several "very, very big combinations of mutual fund management companies, brokerage firms, and major banking institutions" throughout the rest of the decade.

A Distribution Channel

Driving the trend is the growing appeal of banks as a distribution channel for mutual funds, he said. In addition, some consolidation will be needed to counteract the profusion of mutual fund products and companies.

Regional brokerage firms and banks may develop a particularly strong affinity for one another. Mr. Shiebler said. "I think, for instance, you'll see a bank in say. Minneapolis, buying a Piper Jaffray or a Dain Bosworth."

Jeffrey Shames, president of Boston-based Massachusetts Financial Services, already has some experience with strategic alliances. Earlier this year, the independent Bankers Association of America selected his company to develop mutual fund sales programs for its members.

"We're looking for all types of strategic alliances," Mr. Shames said. "I don't see us becoming a bank, but I see us aligning with banks," lie added.

Troy Shaver, president and chief executive of John Hancock Broker Distributors, Boston, said his company is on the verge of announcing several partnerships with banks. "Strategic alliances are critical for us," Mr. Shaver said.

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