Encouraged by U.S. investors' surging interest in foreign securities, foreign banks are introducing U.S.-registered international mutual funds.
One of the biggest is France's Societe Generale, which launched three funds in September - Sogen Overseas Fund, Sogen Gold Fund, and Sogen Money Fund.
Spain's Banco Santander runs the Emerging Mexico Fund, which is listed on the New York Stock Exchange, and plans to launch more Latin American funds.
LaSalle National Trust, a unit of Holland's ABN Amro, offers the Rembrandt family of funds.
Other Participants
Other big U.S. units of foreign banks that offer mutual funds include Bank of Montreal's Harris Bankcorp, Bank of Tokyo's Union Bank, and Allied Irish Banks' First Maryland Bancorp., as well as European banks like Swiss Bank Corp.
Credit Suisse and Credit Commerciale de France, also offer a growing array of mutual funds either directly or through U.S. investment advisory units.
The mutual fund programs of foreign banks are being set up mainly to cater to rising demand from retail investors, including private banking customers, for the higher returns that foreign securities offer.
According to the Investment Company Institute, a Washington-based trade group for the mutual fund industry, foreign equity funds took in a record $5.6 billion in net new money in October - compared with $7.7 billion for domestic stock funds - down from a peak of $9.2 billion in April.
Individuals are Latecomers
"Pension funds started moving into foreign securities 10 or 15 years ago and only recently are American individuals are investing," said Jean Marie Eveillard, president of Sogen Asset Management Corp., a unit of Societe Generale.
Mr. Eveillard said the French bank decided to launch three more funds in response to demand from brokers and rapid growth in an existing fund, Sogen International Fund.
Sogen International, mutual fund that is registered with the Securities and Exchange Commission, invests in stocks, bonds, and real estate securities worldwide.
It has 50,000 U.S. shareholders and has more than doubled the size of its funds in the last 12 months to $1.3 billion.
Five-Star Rating
The fund, which has the top five-star rating from Chicago based-Morningstar Inc., is up 22% on the year to date and has registered a 17% net annual yield since it was launched in 1975.
The funds are distributed through brokers that include PaineWebber Inc. as well as financial planners around the country.
The bank plans to close Sogen International in January in order to "digest" growth, Mr. Eveillard said.
Meanwhile, the French bank's three other funds are growing nicely.
Sogen Overseas has collected $25 million, Sogen Gold - which invests in gold-related securities such as mining companies - $8 million, and Sogen Money $3 million.
Four Funds from Amro
Other foreign banks are moving equally fast.
ABN-Amro, for example, set up four international funds this year:
* The Global Fixed Income fund, which invests mainly in government securities, had $14 million as of Sept. 30, and the return was 12.16%.
* The International Equity Fund, with $12 million and return of 19.9% as of Sept. 30.
* The TransEurope equity fund and Asian Tigers equity fund, which are not yet fully funded.
"It's the most cost-effective way of providing investment management services to a large segment of the market," said Paul Kampner, senior vice president with Lasalle National Trust, a Chicago-based unit of ABN Amro.
Dollar-Denominated Funds
The bank is also developing dollar-denominated offshore funds that will likely be based in Curacao or Luxembourg, mainly for Latin American customers.
The bank is considering setting up a Latin American offshore fund.
"The strength of banks in mutual funds is in their distribution network," Mr. Kampner said. "We have an advantage over other funds because we can sell through our 1,900 offices around the world."
Like other foreign banks, however, ABN Amro has not hesitated to join forces with U.S. mutual fund companies and sells Fidelity Investment funds through its offices.
Fidelity has also struck an alliance with Israel's Bank Hapoalim and Israel Discount Bank.
Nishan Vartabedian, executive vice president and head of Fidelity's bank services division, said it is currently marketing both U.S. domestic and international funds to foreign banks in Miami and Houston.
Product Line Expanded
Bank Hapoalim, which claims to be the largest mutual fund company in Israel, with around 30% of some $10.3 billion invested in mutual funds in the country, recently expanded the range of mutual funds it offers in Israel and abroad by offering Fidelity funds through its branches.
Still, some foreign bankers suggest there is little time left for getting in on the mutual funds boom.
"We've been through two or three extraordinary years, but I'm afraid we're not too far from peak," Mr. Eveillard said.
"At some point, the music will stop and the industry will run out of individuals moving money from CDs into mutual funds."
