It should be easy to tell who's a banker among the 1,500 mutual fund executives gathered in Washington this week for their annual convention.
The bankers will be the ones still dazed from last year's nosedive in stock and bond mutual fund performance.
As relative newcomers to the mutual fund business, many bank executives got their first taste of a major downturn that saw money flowing out of portfolios.
So the Investment Company Institute's annual bash in Washington, which began Wednesday evening and continues through Friday, may at times seem more like a group therapy session for the bankers in attendance.
"The conference can function as a support group - to hear from the mutual fund companies, which have been around for a long time, that have gone through a number of down cycles," said Lee Chase, vice president, brokerage products for Norwest Corp., Minneapolis.
It's true that bank-managed funds, thanks in part to their conservative investment leanings, suffered a little less than their nonbanking competitors. But market share at commercial banks and thrifts declined to 11% last year, from 14% two years ago, according to Sanford C. Bernstein & Co.
Though reports for first-quarter 1995 are encouraging - investors are returning to fund investment and banks' share of the overall business has edged up - some bankers are still rattled.
A few are throwing in the towel and giving up their managed funds. Sunburst Bank, a community bank in Mississippi, cited the bond market crash as a reason why it wants to merge its only fund into an outside company's portfolio.
And executives at mutual fund companies are getting unsolicited requests from banks looking to jettison their fund families.
Indeed, last year's mutual fund slump is even overshadowing the conference's agenda. A program on bond investments raises the question: "Are they dead?"
Nor is it a mere coincidence that the conference's keynote address, - to be given by General Colin Powell, former chairman of the Joint Chiefs of Staff - is titled "The Management of Crisis and Change."
The idea of mutual fund companies and banks swapping ideas on how to rebound from a bad year would have been laughed at not too long ago. Mutual fund companies saw banks as potential competitors, and closed the doors to their conferences.
But times have changed.
As banks continue to amass assets under management, mutual fund companies can no longer deny banks their rightful place in a trade group that represents the fund industry.
What has made that acceptance easier is the reality that banks possess a huge, loyal customer base that offers tremendous profit potential for mutual fund companies.
"Many of the traditional ICI members realize the potential of banks as channels through which they can sell their own funds and see them less as competitors," said Joy Montgomery, president of Money Market Initiatives, a bank consulting firm in Morristown, N.J.
The ICI has made strides over the last year to make banks feel welcome, according to some bankers interviewed. Bankers say more of them are getting seats on the trade association's committee groups, which monitor relevant legislative and business issues of the industry.
More significantly, the ICI has named bankers to its board of governors, the association's policymaking body. Five of the 46 seats are now occupied by bankers, up from two in October and zero three years ago.
Of the 118 banks with proprietary mutual funds, 100 are members of the ICI. The organization claims it represents about 90% of the total assets in bank-managed funds.
Banks use the ICI conference as a way to find mutual fund companies who want to sell investments through bank trust departments, said Scott Degerberg, a vice president at Fifth Third Bank, Cincinnati, who is attending the conference.
"A lot of what you do is not going to sessions, it's talking to people over dinner," said Mr. Degerberg. "The ICI is a cost-effective way to network."
Mutual fund companies are also fighting to get onto the list of preferred funds that banks use to sell to their retail customers, and may use the conference to sell themselves.
Also, the conference will be awash in representatives with companies trying to sell services to bank-managed funds. It will be hard not to trip over marketers from funds distributors and technology service companies.
But ICI's extension of an olive branch to banks in recent years hasn't been well received by all bankers involved in selling investment products. Some are skeptical about whether the group adds much value to their institutions.
Ms. Chase said she has had trouble justifying the costly annual dues to her bosses at Norwest. Annual dues are based on a complex formula which involves the bank giving up a percentage of assets managed by the mutual fund family. Norwest, which manages $7.5 billion in assets in its Prime Value Funds, would have to pay $153,000 a year, according to Ms. Chase.
As a result, the bank has declined to be an ICI member, with the all requesite benefits such as legal counsel, entry to other ICI conferences, and access to special fund studies.
Norwest, however, is paying a $730 nonmember registration fee so Ms. Chase can attend.
Some bankers are just as happy to skip the event altogether.
"The mutual fund industry still just hates us, even though mutual fund companies and banks have relationships," said Randy Bateman, chief investment officer at Cincinnati-based Star Banc Corp. "I don't want to go someplace where people don't like me."
