Though some banks have recently abandoned their forays into proprietary mutual funds, Dauphin Deposit Bank and Trust Co. is moving in the other direction.
The Harrisburg, Pa.-based bank, which has $5 billion in assets, announced plans to replace its current collective trusts with a handful of mutual funds beginning in January.
The funds will be kicked off by converting nearly $800 million in assets already under management, subject to plan sponsors' approval. The four-fund family will include three fixed-income funds and one equity portfolio.
A Dauphin executive said that the bank is wading into the fund business as part of an effort to offer its customers an investment vehicle that is priced on a daily, rather than a monthly, basis.
"Our primary interest is to better serve our fiduciary customers," said Charles Robson, Dauphin's vice president for trust administration. "It's very difficult to be competitive without having daily priced assets."
With mutual funds, investors will soon be able to monitor results in the local newspaper, Mr. Robson said. That easy accountability has become a particular necessity in the hunt for 401(k) money, he added, which now makes up nearly half of the bank's qualified plan assets.
Hopper Soliday and Co., a brokerage wholly owned by Dauphin, will handle fund sales.
Dauphin will market the new funds with help from Federated Services Co., which will also act as administrator and distributor.
While Dauphin's trust vehicles are being converted to mutual funds, the bank's restrained investment approach will remain unchanged.
"Our philosophy has always been conservative, but we're good at it to the extent that we've been able to beat major market indices over a period of time," Mr. Robson said.
But that very conservatism may hinder the bank's ultimate ability to hold current accounts and to capture new assets, said Geoffrey Bobroff, a consultant based in East Greenwich, R.I.
Banks' existing culture has often hamstrung sales efforts and hindered the recruitment and retention of top portfolio management talent, he said.
Plus, bank offerings alone don't always slake their customers' thirst for mutual funds. Many retirement plan sponsors soon demand brand-name nonbank funds, which can siphon assets from proprietary products, Mr. Bobroff said.
But Dauphin is counting on the savvy asset management with a local touch that so far has been its calling card. Robson expects the bank's community ties and local investment decisions to remain appealing to both retail and institutional customers.
"Because we're right here - not in New York or another money center - we're able to be very responsive to our clients," he said.
