Mellon Bank Corp. is making some headway in its efforts to squeeze more revenues from its Dreyfus Corp. mutual fund subsidiary, the banking company's latest earnings report shows.
Pittsburgh-based Mellon company said Dreyfus' investment advisory fees climbed 5.1% in 1995, to $309 million. In the same period, mutual fund assets under management jumped 16.7%, to $77 billion.
"Growth has been slow but steady," said Robert Smith, director of research at Putnam Lovell & Thorton, San Francisco.
The asset growth was a big reason for the revenue gains. Observers noted that Dreyfus, known chiefly as manager of fixed-income portfolios, benefited from the 1995 bond-market rally.
The Dreyfus Funds also waived fewer fees in 1995, Mellon said. Mutual fund companies, which make the bulk of their money by charging investment advisory fees, frequently forgo these fees to encourage investors to put their money into their fund families.
The reduction in fee waivers is "a very good sign," said Avi Nachmany, a partner with Strategic Insight, a mutual fund consulting firm in New York. "You do that when there's clearly stability in the relationship with shareholders."
The earnings report also showed that fees for managing the Dreyfus Funds accounted for nearly 10% of Mellon's total 1995 revenues of $3.25 billion.
That relative contribution is flat compared with 1994, said Dennis Shea, a bank analyst with Morgan Stanley & Co. But, he added, that is not troublesome given that Mellon was reporting record earnings of $652 million, up 13% from 1994.
Most of Dreyfus' investment advisory fee revenue came from money-market and cash-management funds, which hold 54.7% of the firm's assets under management.
Those funds, which are the easiest to manage, charge lower advisory fees than stock and bond funds.
"Hopefully what we'll see in 1996 is further improvement with new funds being developed," Mr. Shea said. He added that Dreyfus "needs to get more involved in the 401(k) business."
Observers gave credit to Mellon for beginning to expand Dreyfus' menu of choices. Dreyfus has introduced 10 new stock funds, which it's promoting heavily in print advertisements.
Mellon acquired Dreyfus in 1994 for $1.8 billion. The purchase was the most ambitious ever by a bank of a mutual fund company, causing a stir among many stock analysts who said the bank paid too much.
