In the latest sign of its aggressive approach to the investments business, First Union Corp. has launched an ambitious campaign to sell more of its mutual funds.
The initiative, which started this month and will be stepped up later in the year, entails merging the banking company's two mutual fund families and getting outside brokers to sell them.
As it begins the effort, First Union continues with a massive build-up of its branch-based investment sales force, and awaits the arrival next month of a senior executive to oversee its capital markets group, which includes mutual funds.
"We have a prestigious, nationally recognized fund organization with an extremely impressive, long-term track record," said William R. Ennis, First Union's mutual funds director.
"We want to be able to use that to distribute nationwide," he added.
Mr. Ennis said the first part of the fund-sales push - getting First Union's 1,600 brokers and platform-based investment specialists to sell the Evergreen mutual funds that First Union acquired last year - is off to an auspicious start.
This effort, which commenced this month, has quadrupled sales of the Evergreen Funds so far over the sales pace of last year, he said. First Union obtained the Evergreen Funds when it acquired money manager Lieber & Co. for stock valued at $127 million.
Previously, the Evergreen Funds were a no-load family sold through a toll-free telephone line. To finance broker sales commissions, First Union this month started imposing front-end sales loads that mirror those on the company's other mutual fund group - the First Union Funds.
Another key part of the marketing push is the $8 million First Union has allocated this year to advertise its mutual funds in publications including The Wall Street Journal and Smart Money. This is substantially more than was spent last year, Mr. Ennis said, without being more specific.
Mr. Ennis said First Union aims to start trying later this year to get outside brokers to sell its funds.
If First Union succeeds, it would join an elite few of the 100 largest banks in the mutual fund business - including Chase Manhattan Corp., Wells Fargo & Co., and Great Western Financial Corp. - that tap outside brokers for retail sales, said Kurt Cerulli, principal of Cerulli Associates Inc., a Boston-based consultant.
Outside sales are a key to making retail mutual funds viable, Mr. Cerulli said. But such sales are notoriously difficult, since thousands of mutual funds are competing for brokers' attention.
The merger of the Evergreen and First Union families, which is slated for July 1, will help with the marketing push in several respects, Mr Ennis said. For example, the First Union Funds will take on the Evergreen moniker, giving the banking company fewer fund names to promote.
Also, the combination will expand the Evergreen family, giving investors more choices for shifting their money without paying additional fees.
The First Union Funds offer 33 portfolios with $4.2 billion of assets. The Evergreen Funds have 16 portfolios and $3 billion of assets.
Mr. Cerulli added that the Evergreen name has a better cachet than the First Union name, and so would fare better in a national marketing push.
Mr. Ennis said the name change also will mitigate a potential source of controversy - investors confusing the First Union Funds with bank deposits.
Because of such concerns, a handful of banking companies have stopped using bank names for their mutual fund families. Regulators also have expressed concern about these so-called sound-alike names, although the practice is allowed.
Because of the Lieber acquisition, First Union now ranks as the eighth- largest mutual fund manager among banks, and among the top 75 mutual fund managers in the country.
The Lieber deal also improved First Union's mutual fund performance record. Mr. Ennis said two First Union Funds and four Evergreen Funds have four-star or five-star ratings from Morningstar Inc., - the highest ratings given by the Chicago-based mutual fund researcher.
The fund-marketing push is not alone on First Union's investment products agenda. The company is more than halfway through an ambitious plan to license 2,400 platform representatives to sell mutual funds. They would constitute the largest retail investments sales force at any bank.
Further, First Union has been aggressive in recruiting mutual fund experts.
Donald A. McMullen is joining the company next month as head of the capital markets group, responsible for brokerage, mutual fund, private banking, and trust operations.
Previously Mr. McMullen was president of American Capital Management and Research Inc. in Houston, a sizable mutual fund company. He will replace long-time First Union executive vice president Richard K. Wagoner, who will stay on at the bank with more limited responsibilities.
Mr. Ennis joined First Union last year from the Colonial Group of Mutual Funds in Boston.
