Eager to expand its fund sales to other banks and brokerages, Bankers Trust New York Corp. plans to launch six new proprietary mutual fund portfolios.
The $103 billion-asset company is seeking permission to form five equity portfolios and one fixed-income fund under a new family fund, BT Global Investor Funds, according to Securities and Exchange Commission filings.
To entice brokers to sell the funds, the company has added an up-front sales fee, or load, from which the brokers can draw a commission.
That's a departure for Bankers Trust, which already manages more than $4.6 billion of no-load mutual fund assets in another fund family, the BT Investment Funds.
"With the exception of our private banking and off-shore clients, we haven't made our investment products widely available," said John L. Murphy, managing director of BT Investment Services. "We want to take a skill we do very well and make it available to a broader range of customers."
Bankers Trust will hire four wholesale representatives by yearend to hawk the funds to financial planners and regional brokerages, he said. The company is also planning to sell the new funds through other banks and thrifts, but he gave no details.
Some industry observers say Bankers Trust is in for an uphill battle. Many brokers and bank investment representatives stick to short lists of mutual funds with proven track records and lucrative commission structures.
Mutual fund companies such as Putnam Investments and Capital Research and Management have spent years cultivating loyalty from brokers, said Mary McAvity, a consultant with Cerulli Associates, Boston.
"The only thing going for them is their reputation as an institutional money manager, and the Bankers Trust mystique" that comes from years of managing money for the wealthy, Ms. McAvity said.
She added that "unless they have performance to back up their entrance into this crowded channel, they are going to have a tough time."
Mr. Murphy said his salespeople will push the benefits of investment diversification. Indeed, many of the new portfolios will leverage the company's expertise in international money management.
The Global Investors Funds will include global high-yield, Pacific Basin, international equity, Latin American equity, small capitalization, and capital appreciation portfolios.
Bankers Trust uses Signature Financial Corp.'s patented hub-and-spoke mutual fund structure. Under that arrangement, the portfolios share a central investment pool with existing Bankers Trust mutual funds, but will be marketed and priced separately. The approach is intended to lessen administrative costs and make it easier to launch new funds.
The company also hopes to ride the popularity of index funds by launching several indexed portfolios that also charge sales fees, Mr. Murphy said.
By the end of this month, Bankers Trust will ask the SEC to approve the launch of mutual funds pegged to equity, small-cap, and international equity indices.
One of the points that Vanguard Group and other mutual fund companies have made "is that index funds have performed in line with the top quartile of active managers," Mr. Murphy said.
