Mutual fund sales through banks are sagging, but annuities, short-term Treasury instruments, and deposits are picking up some of the slack bankers and fund executives say.
In a round of interviews last week, most executives said their September and October fund sales were disappointing, and lagged far behind the heady levels of last fall.
"It's uniformly ugly out there," said William O'Grady, national sales manager in charge of the bank division at Alliance Capital Management Corp., New York,
Alliance's sales in September crept up about 5% from August's level, Mr. O'Grady said. But compared to last year, volume was down, and October provided little relief.
The mutual fund slump at banks mirrors the malaise in the fund industry at large. The Investment Company Institute reported recently that $6.4 billion flowed into mutual funds in September -- one-third of the $19 billion that investors plowed into funds in September 1993.
At U.S. Bancorp in Portland, Ore., customers have forgone mutual funds altogether, said LaUra Klein, vice president in charge of investor relations.
"The trend seems to be to go park your money in short-term instruments like T-bills and short, liquid, securities," Ms. Klein said.
Elsewhere, annuities are offsetting much of their losses in the sales of mutual funds.
"Thank God our tax-deferred annuities are sky high from where they were last year," said Michael Maher, a spokesman for Marketing One, a Portland, Ore.--base d company that markets investment products through banks nationwide.
Even so, he said, the company's overall sales declined slightly from August to September.
Both variable and fixed-rate annuity products are "very popular," at Illinois' Hinsdale Federal Bank, said Kenne Bristol, the bank's chief executive.
Fixed and variable annuities account for 50% of total sales and Mr. Bristol expects that to go higher, if interest rates continue to rise.
At Bank Leumi Trust Company of New York, annuities now represent half of total investment product sales. In contrast, last years sales of annuities were negligible, amounting to only 6%, according to Nancy M. Eiden. director of investment services.
She said mutual fund sales have been slipping for the past several months. "We had a poor month in September," she said, "but it's difficult to assess why."
Bank Leumi has also caught on to another trend.
"People have turned on the conservative side," said Ms. Eiden. "We've seen a movement back into bank deposit products because of the uncertainty in the markets."
Another product that has shined recently is the unit investment trust, which offers investors a fixed maturity date and a steady coupon rate.
Unit investment trust sales "tend to do well in these volatile markets," said Jerom S. Contro, manager of the national bank division at Chicago-based John Nuveen & Co.
But on the mutual fund front, "our experience is pretty much the same as the industry's," Mr. contro sasid. "Our mutual fund business has been very flat."
Compared to last year, Oppenheimr Management Corp.'s sales through banks were down, said Maryann Bruce, director of financial institutions sales at the New York-based mutual fund company.
She added that October's sales do not look like much of an improvement -- but pointed out that other fund companies' sales through banks are down more than Oppenheimer's.
There were, of course, exceptions to the general slump.
At Commerce Bank in St. Louis, investment sales shot up 25% over August's volume, according to Charles Kim, a senior vice president. However, that is still down 20% compared to September 1993.
"I think this might have been a one-month aberation," Mr. Kim said.
Pioneer Funds, a Boston-based mutual fund company that has targeted the bank market, was more upbeat.
The company's sales through banks in October were about 80% higher than during the same periodlast year, said Barry G. Knight, Vice president of the company's financial institutions division.
"We are not mirroring what's going on industry wide," Mr. Knight said. He attributed last month's strong sales to the addition of four wholesalers who were hired this fall to market Pioneer's products through banks.
But the prevailing mood was one of resignation to tough times.
Mr. O'Grady of Alliance Capital Managment said investors are responding to ris ing interest rates by shifting to short-term products. And for now, he said, that is bad news for mutual fund sales.
"Overall I think sales are going to stay where they are this year, because people are not acting long term," he said.
That certainly seems to be the story behind September's sales figures.
Stock funds attracted $8.7 billion in new money in September, compared with $11.3 billion in August.
Bond funds, previously bank customers' preferred investment product, have fallen out of favor since rising interest rates put a damper on their performance. In September, $2.4 billion flowed out of bond funds, following $1.4 billion in withdrawals in August.
Aside from August's rise in total mutual fund sales, volume has been down, month-to-month, ever since May.
