Alliance Capital Management Corp. has snapped up one of the best-known bankers in the mutual fund business to expand its sales through banks.
Richard A. Davies, president of First Chicago Investment Services, will start work Oct. 2 as managing director of the New York-based mutual fund company's bank sales division, Alliance confirmed.
As head of the First Chicago Corp. brokerage subsidiary, Mr. Davies led a broad expansion into mutual funds and other investment sales, making the banking company a symbol of the industry's aspirations in the field.
He fills an important niche for Alliance, a leading supplier of mutual funds that has been without a bank liaison since William O'Grady jumped to Fidelity Investments last March.
Mr. Davies, 39, spent six years at First Chicago, the last four as president of the brokerage. Since April, he has also been a managing director of First Chicago Investment Management, an umbrella group for the company's trust, brokerage, and retail asset management units.
Under his direction, the brokerage unit's sales of "packaged products" - investment pools such as mutual funds and annuities, as opposed to individual stocks and bonds - have grown 400% since early 1994, according to Alliance.
For the past few years, Alliance's mutual funds have been among the top sellers at First Chicago's brokerage.
In part because of the sales effort he led, assets of First Chicago's Prairie Funds family have doubled to $2.9 billion in two years.
His exit from First Chicago comes in the shadow of the banking company's announced merger with Detroit-based NBD Bancorp. Though the deal was cast as a merger of equals, many bank analysts have said it is increasingly apparent that NBD's management is calling the shots.
"I think Dick (Davies) saw the writing on the wall, that Detroit was winning," said an industry insider, who asked not to be identified.
While the observer said there was no specific threat to Mr. Davies' position at First Chicago Investment Management, he added that it was certain the executive's "growth at First Chicago would have been constrained" after the merger with NBD.
For his part, Mr. Davies insisted that the merger had nothing to do with his decision to leave First Chicago. Indeed, he said, he had held talks with Alliance a month before the merger was announced.
"Frankly, even if the merger had not come along, I would still be accepting this position" at Alliance, Mr. Davies said in a telephone interview from Chicago.
Patrick Walsh, who has been running First Chicago's brokerage sales force, has been named to replace Mr. Davies, a bank spokesman said. However, the spokesman added that the company was evaluating all operations in light of the merger with NBD.
Michael J. Laughlin, an executive vice president at Alliance and chairman of Alliance Funds Distributors, said Mr. Davies' first order of business will be to contact executives at the major banks with which the company has selling agreements. Mr. Davies will try to mend any relationships that might have faltered during the months Alliance was without a dedicated bank channel manager.
Alliance was a pioneer in the sector, initiating sales through banks in 1987. The company manages $43 billion of fund assets, placing it among the top 20 U.S. mutual fund companies.
Mr. Laughlin said that since the beginning of the year, Alliance's mutual fund sales through banks have slipped from 12% of its total volume in 1994, to 10% so far this year.
"I would be naive to think that sales haven't suffered" since Mr. O'Grady left, Mr. Laughlin said. "And I attribute that, in part, to the lack of an executive to handle our bank channel" sales.
Alliance also plans to expand its selling arrangements with banks to include investment products such as annuities, and wrap fee mutual fund products, Mr. Laughlin said. Mr. Davies will be in charge of those negotiations, he added.
Dominick Fontana contributed to this report.
