1st Interstate Unites Fund Families and Their Management

First Interstate Bancorp has expanded its mutual funds and consolidated its investment management operations under one unit.

The Los Angeles-based banking company on Oct. 2 combined most of the portfolios from its two mutual fund families - the Westcore Funds and the Pacifica Funds - under the Pacifica name.

At the same time, the funds' management was moved to the First Interstate Capital Management unit, in Scottsdale, Ariz.

The reshuffling has been ongoing since late last year, and started with the defection of several portfolio managers associated with San Diego Bank and Trust Co., which First Interstate acquired, along with the Pacifica Funds, in 1993.

First Interstate, a $55.8 billion-asset company is also embroiled in a hostile takeover bid by Wells Fargo & Co., though bank officials and most observers say the developments are not related.

Plans to consolidate the funds under one name and management started well over a year ago, bank officials said.

The strain of maintaining a splintered marketing effort and separate management teams was expensive and unwieldy in light of the cost-cutting drive the bank was undergoing, said Edward Claunch, president of First Interstate Capital Management.

"There had been support for this consolidation from within the unit, but really it was senior management's interest in this that accelerated the decision," he said.

But sources close to the bank said First Interstate's decision to move all of its mutual fund operations to Arizona caused an uproar among many long-time portfolio managers, who decided to leave rather than relocate.

Many of the former managers joined Kennebec Investment Advisors, San Diego. The company was set up last year by Harley K. Sefton, who was the principal investment adviser for San Diego Bank and Trust and had helped manage the Pacifica Funds.

Mr. Claunch said there had not been a mass exodus but confirmed that a number of mutual fund managers had left following the acquisition of San Diego Trust. Many of those positions had been filled by managers from other areas of the bank, he added.

Other factors leading to the move included an August decision to spin off Denver Investment Advisors, which managed the Westcore Funds, and the Westcore board's reluctance to meld the two fund families together, Mr. Claunch said.

"In dealing with the sale of Denver Investment Advisors to its employees, the Westcore trustees got involved, and fairly early on said they wanted to maintain the Westcore name," Mr. Claunch said. "The Pacifica trustees were more supportive of the change."

To help push the deal through, First Interstate agreed to keep the Pacifica Funds expense ratio at the level it had last year, Mr. Claunch said.

"We've guaranteed we'll operate at or below that point from now until the end of September 1996, and we will make any reimbursements if we go over," he said.

The Pacifica Funds are now comprised of 18 portfolios with $4.4 billion of assets under management.

A total of $755 million more, in seven portfolios, will stay in the Westcore Funds and continue to be managed by Denver investment Advisors. Though the Westcore Funds will remain on First Interstate's short list of preferred mutual funds, they will not be actively marketed, Mr. Claunch said.

First Interstate retained Furman Selz, New York, to administer and distribute the Pacifica Funds, and Denver-based Alps Mutual Fund Services will continue on in the same capacity for the Westcore Funds.

Mr. Claunch said "now that we've focused the management of these products under one organization we hope we'll have larger and more concentrated funds, a bigger selection, and enhanced marketability."

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