BayBanks bucking a trend by beefing up mutual find list.

Boston's BayBanks Inc. is beefing up the list of mutual funds it offers its customers, adding a few well-known names while dropping others.

The $10.5 billion-asset banking company now offers more than 50 funds, including, its proprietary BayFunds.

Added to the list were portfolios from Franklin Resources, John Nuveen & Co., and Fidelity Investments' Advisor family of mutual funds. At the same time, BayBanks trimmed some of its offerings from Putnam Investments and Eaton Vance Distributors.

In recent months, many banks have slashed their lists to only a handful of outside and proprietary funds. BayBanks' decision to broaden its investment options may be a sign that banks have cut enough.

Geoffrey H. Bobroff, a mutual fund consultant based in East Greenwich, R.I., said many banks have had to limit the funds they carry to those few that offer the best support and margin for profit, while not overly competing with any proprietary funds the bank might carry.

But rocky markets and flaccid returns on some mutual fund investments have led many investors to demand broader options, he said. And regulators are looking more closely at how banks choose the funds they carry. The combined pressure, he said, is causing many banks to reexamine their short lists.

"I think bankers came into the business thinking they were going to have a handful of fund offerings," said Mr. Bobroff. "Maybe now they think they pruned too much and are going the other way."

Richard F. Pollard, vice chairman of BayBanks, said he doesn't see any reason why banks should cut their lists of fund offerings.

"It was clear to us that people want a wider choice of funds," Mr. Pollard said.

While customer demand was a driving force behind the decision to expand, Mr. Pollard admitted that "there is an attractive [profit] margin to working with these outside firms."

Mr. Pollard said, he expects some losses for the bank's BayFunds but says the funds should stay popular with customers looking for no-load investments.

BayBanks is depending on the high name recognition and marketing muscle of companies like Franklin and Fidelity, for example, to bring in more than enough business to make up for any losses in proprietary business, he said.

The bank is also hoping to draw in more customers with the addition of international funds, which have been a hit with investors this year.

The expansion spells good news for companies like Franklin, which are struggling to find new points of sale for their funds in an increasingly crowded marketplace.

Franklin did 25% of its business through banks last year, a company spokeswoman said. Selling through BayBanks' 200 branches will give the mutual fund company a toehold in the competitive Boston market.

"This is the first major bank in Boston that we've done business with," said the spokeswoman. "It's a tremendous opportunity for us."

But not everyone is happy about the changes.

Eaton Vance, which sells 15% to 20% of its mutual funds through bank channels, saw two of four portfolios slashed from BayBanks' short list.

John Trotsky, vice president in charge of marketing, said the company proposed adding more of its funds to BayBanks' roster but the bank declined.

"We don't see that it will make much of a difference in our business," said Mr. Trotsky.

"We were hoping to offer more, but it didn't work out that way."

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