When First Commerce Corp. started offering mutual funds two years ago, officials decided they had to bulk up fast to survive in a competitive market.
After seeding its Marquis Funds with $500 million of converted trust assets, the New Orleans-based banking company launched an ambitious plan to double its mutual fund assets.
But while many banks have relied on converted trust assets to help their funds reach critical mass, First Commerce has pushed its mutual funds assets under management to more than $1 billion through retail sales.
"Because of our initial conversion, we were up and running from day one, and we haven't stopped running," said Dale Kaliszeski, president of First Commerce's brokerage subsidiary, Marquis Investments.
Since last year, the $7 billion-asset banking company - Louisiana's largest - has flooded the airwaves with television and radio spots that tout its financial planning services. The bank's 31 investment representatives have also been encouraged to develop close ties with branch managers in order to keep a steady flow of referrals coming in.
First Commerce will have to keep up the pace if it wants to stay ahead of the competition. Hibernia Corp. and Premier Bancorp, which have carved sizable fiefdoms for themselves in the state, both have fund families of their own.
To gain an edge, First Commerce officials say they'll use the Marquis Funds as a springboard to offer new investment products and services.
"The reason for launching the funds was really to have local control over how the funds were managed and to be able to offer other products based on them," said Lynn Boyle, vice president in charge investment sales.
Last month the bank unveiled an asset allocation product that utilizes the five portfolios that make up the Marquis Funds. Among the portfolios are money market, government securities, Louisiana tax-free income, value equity, and growth and income. Customers can also choose to include Federated Investors' Municipal Cap Fund, and funds from GT Global, which focuses on international and global investing.
The product seems to be a hit with First Commerce customers, who have poured more than $1 million into asset allocation portfolios in June.
By the end of July, the bank will roll out a unit investment trust that uses the Marquis Funds as its underlying investment.
Unlike many unit trusts, which carry a basket of fixed-income instruments, First Commerce's product ties in an equity fund that can provide investors a bonus above the fixed rate.
Product managers invest 50% of the customer's money in a zero-coupon Treasury that provides a guaranteed rate if held to maturity - effectively preserving the investor's principal. The rest of the money is placed in the Marquis Value Equity Fund.
"Everything that they gain off the fund is, as they say in Louisiana, 'lagniappe' - just extra," Ms. Boyle said.
The investment sales effort has paid off for First Commerce. The banking company took in $110 million of fee income in 1994, $7.4 million of which came from its brokerage operation, according to Ms. Boyle. She expects that figure to rise to $10 million for 1995.
Marquis Investments started off as a discount brokerage 12 years ago, and in 1990 began selling mutual funds and annuities. Mr. Kaliszeski says he doesn't consider other banks in the area as their main competitors, but rather brokerages, such as Merrill Lynch and PaineWebber.
"We don't see much activity coming from banks, beyond tapping their own client base," Mr. Kaliszeski said.
He quickly added that that wouldn't preclude First Commerce from encroaching on its competitors' markets, however. Indeed, the bank's 114 branches overlap within many areas with Premier and Hibernia, to name a couple.
But Anthony P. Psilos, president of Hibernia Investment Services, says he's too busy trying to build up business from within his bank to worry too much about his competitors. He characterizes his relationship with First Commerce as "cordial."
"I meet with Dale (Kaliszeski) at least once a month for lunch," Mr. Psilos said. "We seem to talk about regulatory issues a lot, but we always know what not to ask each other."
