2 Firms Join in Private-Label International Funds for Banks

A New York-based money management firm is teaming up with a small fund servicer to supply banks with proprietary international mutual funds without the portfolio management headaches.

The partners are Schroder Capital Management International and Forum Financial Group, Portland, Me.

Forum devised a system that allows individual banks to invest in common, or core, portfolios. These portfolios, in which assets from a variety of bank programs are pooled together, will be managed by Schroder, a money manager with $15 billion in U.S. assets.

This unusual partnership comes as many banks looking to round out their proprietary mutual fund families have often been stumped when it comes to international funds.

Although many banks deftly manage domestic bond and stock portfolios, few boast the in-house ability to navigate international markets.

So far, the approach appeals to at least one bank fund family.

"We wanted to have an international arm"in our fund menu, said Phillip J. Owings, senior vice president trust and investment division Fourth Financial Corp., Wichita, Ks.

Fourth Financial already employed Schroder as a manager for some of its institutional assets but pushed for "a structure that would allow integration of their style of management in a bank proprietary product," Mr. Owings said.

Fourth Financial, the $7.5 billion-asset parent of Bank IV, Wichita, is the first bank to commit to the private-label arrangement, said Thomas G. Sheehan, legal counsel at Forum.

Besides offering a bank potentially lower costs than a fund created from scratch, using a private label can hasten a bank's move into offering overseas investment options.

"After filing registration statements, you can have a fund in 75 days," Mr. Sheehan said.

This week shareholders ratified board recommendations to convert Schroder's $19-million asset emerging markets and $215-million international equity mutual funds to the master-feeder structure, Mr. Sheehan said. The change will become effective Nov. 1.

Schroder previously managed money international investments for Fourth Financial, but the bank sought a switch to eventually lower investment expenses and provide a product controlled and branded by the bank.

"We preferred core and gateway because it kept our board in control but gave us an economy of scale through a larger asset pool," Mr. Owings said.

Schroeder executives say the new approach should expand the company's presence in the bank channel.

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