Concord Financial Group cemented its position as the No. 1 administrator of bank-managed mutual funds during the second quarter.
The New York-based company provided administrative services to bank proprietary funds with $29.5 billion of assets, up from $25.6 billion of assets in the first quarter, according to a survey by Lipper Analytical Services Inc.
Underscoring the growing popularity of bank mutual funds, Lipper reported that 13 of the 15 companies it tracks boosted the volume of mutual fund assets that they administer.
The exceptions were Concord's nearest competitors, PEPC Corp. and Boston Co.
Variety of Services
Mutual fund administrators provide a range of services, including accounting, statement preparation, literature mailing, custodial and transfer services, and institutional and wholesale marketing. Exact duties can vary and may even be split among several companies.
Concord officials attributed its gains to hot fund sales, particularly among individual bank customers. "There's been a tremendous emphasis on the retail side of the business," said Joseph F. Kissel, a Concord executive vice president. "It's a momentum thing. It's a commitment by the bank partners to focus their retail efforts."
Concord serves six bank clients with large mutual fund families: BankAmerica Corp., Bank of New York Co., Barnett Banks Inc., Chase Manhattan Corp., Credit Suisse, and United States Trust Co.
Proprietary Programs
Its two newest clients -- First American Corp. of Nashville and Continental Bank of Chicago -- are preparing to launch proprietary funds.
PFPC, the second-ranked administrator, saw its assets slip from $25 billion to $24.2 billion in assets.
The decrease was caused by trading decisions made by advisers of the institutional funds, according to a spokesman for the Wilmington, Del., company, a subsidiary of Pittsburgh's PNC Bank Corp.
Boston Co., the third-largest administrator of bank-related funds, closed the quarter with $18.3 billion under its control, down from $21.4 billion the previous quarter.
Sold to Mellon
Company officials attributed the decline to the sale of Boston Co. by Shearson Lehman to Mellon Bank Corp. in Pittsburgh.
Among the accounts lost by Boston Co. was the $4.5 billion Pierpont Fund family, managed by J.P. Morgan & Co.
Boston Co. also lost administration contracts for Baltimorebased Mercantile Safe Deposit and Trust Co. (MSD&T Funds) and for the Arch Funds managed by Mercantile Bank of St. Louis. Together, they represent about $1 billion in assets.
Jon Hubbard, spokesman for Boston Co., dismissed the decline as "a one-time event" caused by the merger with Mellon.
The company's internal figures show assets under administration at $22.3 billion, with the increase coming from new investments and increased value of existing accounts, Mr. Hubbard said. "This is a growth business for us and we continue to do well."
All of the funds that left were jointly serviced by Boston Co. and PFPC.
Awkward Situation
After PNC Bank bought Boston Co., it left those accounts in the awkward position of being jointly serviced by the two bitter rivals from Pittsburgh, Mr. Hubbard said. Morgan, for instance, feared its service would suffer, he said.
Signature Financial Group in New York was the major beneficiary of the merger jockeying. The bank fund assets it administers leapt from $5.2 billion to $12 billion, largely on the strength of picking up the Pierpont business. That boosted Signature from 11th to a tie for sixth place with Winsbury Co. in the Lipper rankings.
In 1989, Signature pioneered the "hub and spoke" style of mutual fund administration that is attracting much interest in the industry. Signature has trademarked the name. Other fund families call it a "master feeder" system. It is a legally separate entity that requires different accounting and regulation.
Instead of creating several different funds for no-loads, frontend loads or back-end-loaded products, the master feeder sets up one "hub" that does fund management, custody, and securities pricing.
The "spokes" are whatever form the investments take, whether annuity, privately managed account, group trust, load mutual fund, or offshore investment.
The spokes are responsible for their own marketing, distribution, transfer agency, and shareholder servicing. They can charge fees or market the funds any way they want, but all of the partners are investing money with the hub adviser.
"We were very happy with the Boston Co., but our conversion to the hub-and-spoke structure led us to move to the author of that structure," said Eve Guernsey, managing director of Morgan's U.S. funds management division.
Carol Bradovchak, a marketing executive with Boston Co.'s investor services group, said her company has studied the issue and its potential regulatory and accounting complications. She added, "The vote is still out on hub and spoke."
