Federated Investors has introduced a series of asset allocation funds designed for sale through bank trust departments.
Dubbed the Managed Series Trust, the funds offer four investment objectives, from income to capital appreciation.
Asset allocation funds enable customers to invest in a single account that diversifies their holdings across a range of asset types to meet a specified investment objective.
The mix of stocks, bonds, and cash in each fund is shifted periodically in response to changing market conditions. But the mix must stay within parameters that are set when the customer opens the account.
Though many such products are available for retail consumers, Pittsburgh-based Federated is believed to be the first to offer funds tailored to trustees.
The Managed Series Trust features relatively narrow bands of permissible asset holdings. That is important to trustees, because they cannot fulfill their fiduciary duty unless they know "in precise terms what the product is and where it can invest," said Henry J. Gailliot, a senior vice president at Federated.
"We believe a fiduciary will have an extra level of comfort with this product," Mr. Gailliot added.
The funds were opened for investment May 25 with $80 million of assets, most of which was invested by a handful of long-time Federated customers.
The company has relationships with 4,000 banks, and has $70 billion of assets under management or administration.
One of the first banks to invest trust assets in the funds was Irwin Union Bank and Trust Co., a community bank in Columbus, Ind., that administers $300 million of trust assets.
Irwin Union has invested a little more than $2 million in the Managed Series Trust, according to William Helmbrecht, vice president for trust.
Accounts of that size can be difficult to diversify, Mr. Helmbrecht said.
By entrusting them to Federated, the bank can offer better services at a lower cost, so the arrangement "is beneficial from our standpoint and from the client's standpoint."
Mr. Helmbrecht said customers will pay the bank $300 a year for the asset-allocation services. The bank will also share in asset management fees collected by Federated.
Mr. Gailliot said community banks won't be the only users. "Many medium and even moderately large trust departments will have a lot of accounts with $10,000 and $25,000 in balances."
