Bisys Group has won the right to distribute the proprietary mutual funds for the combined Chase Manhattan Corp. and Chemical Banking Corp.
Chase renewed Bisys' contract to distribute its $9.4 billion-asset Vista Funds, which will be pooled with Chemical's $7 billion-asset Hanover Funds after the two banking companies merge later this quarter.
The merger would make the new Chase Bisys' biggest bank distribution client. The relationship would generate at least $4 million in annual fee income for the Little Falls, N.J.-based computer services and outsourcing company, according to a consultant's estimate.
"We are very excited at the prospect of helping this fund family grow and compete against some of the biggest in the industry," said Richard E. Stierwalt, chairman of Bisys' Concord Financial Group unit.
Furman Selz, which distributes the Hanover Funds, lost out on the post- merger contract.
Shareholders of the Vista and Hanover funds will meet April 2 to choose whether to merge the fund families. If they approve the combination, it would be the fourth-largest bank-run mutual fund family in the country, according to Lipper Analytical Services, Summit, N.J.
Mr. Stierwalt said that Bisys is mapping out a broadening of Chase's fund sales through financial planners and an expansion of selling agreements with nonbank broker-dealers, but he would not go into detail.
Distributors help banks secure permission from state and federal regulators to sell a bank's proprietary mutual funds through broker- dealers. The companies also help develop marketing plans. In return, they receive a small percentage of the assets under management.
Geoffrey H. Bobroff, a mutual fund consultant in Greenwich, R.I., said distribution fees, which are supposed to cover expenses, usually amount to 25 basis points of assets under management. In addition, mutual fund advisers usually pay distributors an extra two or three basis points of managed assets.
Bisys also gets an undisclosed fee for marketing Chase's money market funds to institutional clients. The company stands to gain even more from helping sell Chemical's money funds - which make up 93% of the assets in the Hanover Funds.
