In a new ranking of banks' favored mutual fund providers, Pittsburgh-based !Federated Investors has claimed the top slot.
The 1994 Bank Study by Boston-based Dalbar Financial Services found that banks rated Federated as the top distributor for banks' own fund families, as well as the leading outside supplier of funds.
"Federated Investors enjoys the highest level of satisfaction as a provider of both proprietary and nonproprietary funds ," according to the Dalbar survey.
In the ranking of outside suppliers of mutual funds, Oppenheimer Management Group, New York, took the second slot in the satisfaction study, which asked banks! to assess mutual fund vendors based on five criteria: overall impression, organizational support, products, marketing, and operations.
Two Boston-based firms, Fidelity Investments and Putnam Investments, tied for third.
With mutual fund companies battling one another to distribute their products through banks, providing good service and support, as well as good products, is becoming increasingly important, the survey found.
Dalbar's study also showed that mutual fund companies that do not meet banks' needs are "easily replaced and competition is intense."
"Competition has grown dramatically," said James F. Getz, president of Federated's Broker/Dealer Division.
Despite the fact that Federated is not a household name, Mr. Getz said Federated can compete with industry giants such as Fidelity and Dreyfus Corp:
"We have had partnerships with banks for 25 years," he said. He added that the lack of name recognition has not been detrimental to Federated's business.
Banks rated Federated the best in understanding their needs, providing sales and product training, problem-solving ability, responsiveness, and technical support.
On a scale of 1 to 4, with 4 being "very satisfied", bankers awarded Federated a composite rating of 3.37.
Oppenheimer's satisfaction rating was 3.28 and Fidelity and Putnam both received 3.24. The industry average was 3.18.
"We're a needs-based provider," said Ronald M. Petnuch, Federated's director of proprietary funds management.
"We take the needs of individual clients and come up with creative solutions," he said.
For example, Federated has helped banks figure out how to compensate their sales staffs and has advised banks on what kinds of pricing options tO offer.
Maryann Bruce, director of the financial institutions division at Oppenheinmr| said she was "not surprised that Federated came in first, because they do a lot of private labelling for funds."
She added, however, that since Federated's approach is so unique, it should not be placed in the same ranking with more traditional mutual fund managers like Oppenheimer.
"I don't even consider Federated my competition," she said.
Ms. Bruce said Oppenheimer's success rested on understanding banks'needs.
"Everyone of my wholesalers has worked in a bank in some capacity, so they understand the culture," she said.
She said it was particularly gratifying that Oppenheimer beat arch-rival Putnam Investors, which manages the top selling funds through banks.
"We know that Putnam's volume is up there," she said. "But if you're doing the volume and people don't think you're service is as good, then you are vulnerable."
A Putnam spokeswoman said the company would not comment on the criticism.
Putnam spends heavily on product and sales training, two areas that are of "high interest" for banks, according to the Dalbar study.
John Nuveen & Co. and Goldman Sachs & Co. also fared better than the average in the non-proprietary rankings, each scoring a 3.19 composite rating.
Some major distributors through banks, such as Kernper Financial Services and AIM Management Group, scored well below the industry average in Dalbar's study.
